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Local Manufacturing Establishments and the Earnings of Manufacturing Workers: Insights from Matched Employer-Employee Data
January 2011
Working Paper Number:
CES-11-01
We analyze the earnings determination process of more than 400,000 rural manufacturing workers in 12 selected U.S. states. Our theoretical motivation stems from an ongoing interest in the benefits of locally oriented business establishments. In this case, we distinguish manufacturing concerns that are single establishments in one rural place from branch plants that are part of larger multi-establishment enterprises. Our data permit us to introduce attributes of both workers and their employing firms into earnings determination models. For manufacturing workers in 'micropolitan' rural counties, we find that working for a local (single) establishment has a positive impact on annual earnings. However, tenure with a firm returns more earnings for workers in non-local manufacturing facilities. Conversely, for manufacturing workers in 'noncore' or rural areas without urban cores, we find that working for a local establishment has a negative effect on earnings. But, job tenure pays off more when working for a local establishment.
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Access to Workers or Employers? An Intra-Urban Analysis of Plant Location Decisions
September 2010
Working Paper Number:
CES-10-21R
This analysis attributes economies of agglomeration to either labor market pooling or employer-based productivity spillovers by distinguishing the effect of access to workers, measured by place-of-residence, from the effect of access to employers. New establishment location choices serve as a measure of productivity advantages, while census tract level data on access to same-industry employment, other-industry employment, and specialized workers, as well as metropolitan area fixed effects, measure sources of agglomeration and other locational characteristics. The four industries included are selected so that each relies on a workforce with a specialized occupation that is identifiable by place-of-residence, and that productivity and cost advantages are the primary drivers of location choice. The results show that both access to specialized workers and access to same-industry employers contribute to economies of agglomeration at an intra-urban spatial scale, and that the magnitude of the worker effect is large relative to employer-based productivity spillovers.
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Concentration, Diversity, and Manufacturing Performance
July 2010
Working Paper Number:
CES-10-14
Regional economist Benjamin Chinitz was one of the most successful proponents of the idea that regional industrial structure is an important determinant of economic performance. His influential article in the American Economic Review in 1961 prompted substantial research measuring industrial structure at the regional scale and examining its relationships to economic outcomes. A considerable portion of this work operationalized the concept of regional industrial structure as sectoral diversity, the degree to which the composition of an economy is spread across heterogeneous activities. Diversity is a relatively simple construct to measure and interpret, but does not capture the implications of Chinitz's ideas fully. The structure within regional industries may also influence the performance of business enterprises. In particular, regional intra-industry concentration'the extent to which an industry is dominated by a few relatively large firms in a locality'has not appeared in empirical work studying economic performance apart from individual case studies, principally because accurately measuring concentration within a regional industry requires firm-level information. Multiple establishments of varying sizes in a given locality may be part of the same firm. Therefore, secondary data sources on establishment size distributions (such as County Business Patterns or aggregated information from the Census of Manufactures) can yield only deceptive portrayals of the level of regional industrial concentration. This paper uses the Longitudinal Research Database, a confidential establishment-level dataset compiled by the United States Census Bureau, to compare the influences of industrial diversity and intra-industry concentration upon regional and firm-level economic outcomes. Manufacturing establishments are aggregated into firms and several indicators of regional industrial concentration are calculated at multiple levels of industrial aggregation. These concentration indicators, along with a regional sectoral diversity measure, are related to employment change over time and incorporated into plant productivity estimations, in order to examine and distinguish the relationships between the differing aspects of regional industrial structure and economic performance. A better understanding of the particular links between regional industrial structure and economic performance can be used to improve economic development planning efforts. With continuing economic restructuring and associated workforce dislocation in the United States and worldwide, industrial concentration and over-specialization are separate mechanisms by which regions may 'lock in' to particular competencies and limit the capacity to adjust quickly and efficiently to changing markets and technologies. The most appropriate and effective policies for improving economic adaptability should reflect the structural characteristics that limit flexibility. This paper gauges the consequences of distinct facets of regional industrial structure, adding new depth to the study of regional industries by economic development planners and researchers.
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Clusters of Entrepreneurship
October 2009
Working Paper Number:
CES-09-36
Employment growth is strongly predicted by smaller average establishment size, both across cities and across industries within cities, but there is little consensus on why this relationship exists. Traditional economic explanations emphasize factors that reduce entry costs or raise entrepreneurial returns, thereby increasing net returns and attracting entrepreneurs. A second class of theories hypothesizes that some places are endowed with a greater supply of entrepreneurship. Evidence on sales per worker does not support the higher returns for entrepreneurship rationale. Our evidence suggests that entrepreneurship is higher when fixed costs are lower and when there are more entrepreneurial people.
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Mom-and-Pop Meet Big-Box: Complements or Substitutes?
September 2009
Working Paper Number:
CES-09-34
In part due to the popular perception that Big-Boxes displace smaller, often family owned (a.k.a. Mom-and-Pop) retail establishments, several empirical studies have examined the evidence on how Big-Boxes' impact local retail employment but no clear consensus has emerged. To help shed light on this debate, we exploit establishment-level data with detailed location information from a single metropolitan area to quantify the impact of Big-Box store entry and growth on nearby single unit and local chain stores. We incorporate a rich set of controls for local retail market conditions as well as whether or not the Big-Boxes are in the same sector as the smaller stores. We find a substantial negative impact of Big-Box entry and growth on the employment growth at both single unit and especially smaller chain stores ' but only when the Big-Box activity is both in the immediate area and in the same detailed industry.
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Credit Market Competition and the Nature of Firms
April 2009
Working Paper Number:
CES-09-07
Empirical studies show that competition in the credit markets has important effects on the entry and growth of firms in nonfinancial industries. This paper explores the hypothesis that the availability of credit at the time of a firm's founding has a profound effect on that firm's nature. I conjecture that in times when financial capital is difficult to obtain, firms will need to be built as relatively solid organizations. However, in an environment of easily available financial capital, firms can be constituted with an intrinsically weaker structure. To test this conjecture, I use confidential data from the U.S. Census Bureau on the entire universe of business establishments in existence over a thirty-year period; I follow the life cycles of those same establishments through a period of regulatory reform during which U.S. states were allowed to remove barriers to entry in the banking industry, a development that resulted in significantly improved credit competition. The evidence confirms my conjecture. Firms constituted in post-reform years are intrinsically frailer than those founded in a more financially constrained environment, while firms of pre-reform vintage do not seem to adapt their nature to an easier credit environment. Credit market competition does lead to more entry and growth of firms, but also to complex dynamics experienced by the population of business organizations.
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Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?
October 2008
Working Paper Number:
CES-08-37
Why are some places more entrepreneurial than others? We use Census Bureau data to study local determinants of manufacturing startups across cities and industries. Demo- graphics have limited explanatory power. Overall levels of local customers and suppliers are only modestly important, but new entrants seem particularly drawn to areas with many smaller suppliers, as suggested by Chinitz (1961). Abundant workers in relevant occupations also strongly predict entry. These forces plus city and industry fixed effects explain between sixty and eighty percent of manufacturing entry. We use spatial distributions of natural cost advantages to address partially endogeneity concerns.
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An Analysis of Key Differences in Micro Data: Results from the Business List Comparison Project
September 2008
Working Paper Number:
CES-08-28
The Bureau of Labor Statistics and the Bureau of the Census each maintain a business register, a universe of all U.S. business establishments and their characteristics, created from independent sources. Both registers serve critical functions such as supplying aggregate data inputs for certain national statistics generated by the Bureau of Economic Analysis. This paper examines key micro-level differences across these two business registers.
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Analysis of Young Neighborhood Firms Serving Urban Minority Clients
May 2008
Working Paper Number:
CES-08-11
This study empirically investigates Michael Porter's hypothesis that urban minority neighborhoods offer attractive opportunities to household-oriented businesses, such as retail firms (1995). Our analysis compares the traits and performance of firms serving predominantly minority clients to those selling their products largely to clients who are nonminority whites. Controlling statistically for applicable firm and owner characteristics, our findings indicate that the minority neighborhood niche does not offer young firms an attractive set of opportunities. Relative to opportunities in the corresponding nonminority household niche and the broader regional marketplace, the neighborhood minority household market is associated with reduced business viability.
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Changes in Workplace Segregation in the United States Between 1990 and 2000: Evidence from Matched Employer-Employee Data
June 2007
Working Paper Number:
CES-07-15
We present evidence on changes in workplace segregation by education, race, ethnicity, and sex, from 1990 to 2000. The evidence indicates that racial and ethnic segregation at the workplace level remained quite pervasive in 2000. At the same time, there was fairly substantial segregation by skill, as measured by education. Putting together the 1990 and 2000 data, we find no evidence of declines in workplace segregation by race and ethnicity; indeed, black-white segregation increased. Over this decade, segregation by education also increased. In contrast, workplace segregation by sex fell over the decade, and would have fallen by more had the services industry - a heavily female industry in which sex segregation is relatively high - not experienced rapid employment growth.
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