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Firm Structure, Multinationals, and Manufacturing Plant Deaths
October 2005
Working Paper Number:
CES-05-18
Plant shutdowns shape industry and aggregate productivity paths and play a major role in the dynamics of employment and industrial restructuring. Plant closures in the U.S. manufacturing sector account for more than half of gross job destruction. While multi-plant firms and multinationals dominate U.S. manufacturing, theoretical and empirical work has largely ignored the role of firms in the plant shutdown decision. This paper examines the effects of firm structure on manufacturing plant closures. Using U.S. data, we find that plants belonging to multi-plant firms are less likely to exit. Similarly, plants owned by U.S. multinationals are less likely to close. However, the superior survival chances are due to the characteristics of the plants themselves rather than the nature of the firms. Controlling for plant and industry attributes that reduce the probability of death, we find that plants owned by multi-unit firms and U.S. multinationals are much more likely to close. A recent change in ownership also increases the chances that a plant will be closed.
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Families, Human Capital, and Small Business: Evidence from the Characteristics of Business Owners Survey
June 2005
Working Paper Number:
CES-05-07
An important finding in the rapidly growing literature on self-employment is that the probability of self-employment is substantially higher among the children of business owners than among the children of non-business owners. Using data from the confidential and restricted-access Characteristics of Business Owners (CBO) Survey, we provide some suggestive evidence on the causes of intergenerational links in business ownership and the related issue of how having a family business background affects small business outcomes. Estimates from the CBO indicate that more than half of all business owners had a self-employed family member prior to starting their business. Conditional on having a self-employed family member, less than 50 percent of small business owners worked in that family member's business suggesting that it is unlikely that intergenerational links in self-employment are solely due to the acquisition of general and specific business capital and that instead similarities across family members in entrepreneurial preferences may explain part of the relationship. In contrast, estimates from regression models conditioning on business ownership indicate that having a self-employed family member plays only a minor role in determining small business outcomes, whereas the business human capital acquired from prior work experience in a family member's business appears to be very important for business success. Estimates from the CBO also indicate that only 1.6 percent of all small businesses are inherited suggesting that the role of business inheritances in determining intergenerational links in self-employment is limited at best.
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Mergers and Acquisitions and Productivity in the U.S. Meat Products Industries: Evidence from the Micro Data
March 2002
Working Paper Number:
CES-02-07
This paper investigates the motives for mergers and acquisitions in the U.S. meat products industry from1977-92. Results show that acquired meat and poultry plants were highly productive before mergers, and that meat plants significantly improved productivity growth in the post-merger periods, but poultry plants did not.
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Diversification Discount or Premium? New Evidence from BITS Establishment-Level Data
December 2001
Working Paper Number:
CES-01-13
This paper examines whether the finding of a diversification discount in U.S. stock markets is only a data artifact. Segment data may give rise to biased estimates of the value effect of diversification because segments are defined inconsistently across firms, and that inconsistency does not occur at random. I use a new establishment-level database that covers the whole U.S. economy (BITS) to construct business units that are more consistently and objectively defined across firms, and thus more comparable. Using a common methodological approach on a sample of firms which exhibit a diversification discount according to segment data, I find that, when BITS data are used, diversified firms actually trade at a significant average premium. The premium is robust to variations in the method, sample, business unit definition, and measures of excess value and diversification used.
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The Impact of Ownership Changes: A View from Labor Markets
March 2000
Working Paper Number:
CES-00-02
Previous studies of mergers and acquisition often focus on firms' performance such as profits, productivity and market shares. However, from a broad competition policy perspective, the impacts on labor and wages are crucial. In this study, we use plant-level data for the entire U.S. manufacturing for the period 1977-87 to examine the effects of ownership changes on employment, wages and plant closing. Our principal findings are that ownership changes are not a primary vehicle for cuts in employment and wages, or closing plants. Instead, the typical ownership change appear to increase jobs and their quality as measured by wages. However, some ownership changes, particularly those in bigger plants, are associated with job loss, and the typical worker fares much worse than the typical plant. Finally, we find that plants that changed owners have a higher probability of survival than those that did not. Overall, the impact of ownership changes on labor markets are positive.
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NEW DATA FOR DYNAMIC ANALYSIS: THE LONGITUDINAL ESTABLISHMENT AND ENTERPRISE MICRODATA (LEEM) FILE
December 1999
Working Paper Number:
CES-99-18
Until now, research on U.S. business activities over time has been hindered by the lack of accurate and comprehensive longitudinal data. The new Longitudinal Establishment and Enterprise Microdata (LEEM) are tremendously rich data that open up numerous possibilities for dynamic analyses of businesses in the U.S. economy. It is the first nationwide high-quality longitudinal database that covers the majority of employer businesses from all sectors of the economy. Due to the confidential nature of these data, the file is located at the Center for Economic Studies in the U.S. Bureau of the Census. To access the data, researchers must submit an acceptable proposal to CES and become sworn Census researchers. This paper describes the LEEM file, the variables contained on the file, and current uses of the data.
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PRODUCTIVITY AND ACQUISITIONS IN U.S. COAL MINING
December 1999
Working Paper Number:
CES-99-17
This paper extends the literature on the productivity incentives for mergers and acquisitions. We develop a stochastic matching model that describes the conditions under which a coal mine will change owners. This model suggests two empirically testable hypotheses: i. acquired mines will exhibit low productivity prior to being acquired relative to non-acquired mines and ii. extant acquired mines will show post-acquisition productivity improvements over their pre-acquisition productivity levels. Using a unique micro data set on the universe of U.S. coal mines observed from 1978 to 1996, it is estimated that acquired coal mines are significantly less productive than non-acquired mines prior to having been acquired. Additionally, there is observable and significant evidence of post-acquisition productivity improvements. Finally, it is found that having been acquired positively and significantly influences the likelihood that a coal mine fails.
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Job Flow Dynamics in the Service Sector
November 1999
Working Paper Number:
CES-99-14
This paper uses the new comprehensive Longitudinal Establishment and Enterprise Microdata at CES to investigate gross and net job flows for 1990 to 1995 for all establishments in the service sector. After examining the recent shifts in the distribution of employment in non-financial services, from single unit firms to multi-unit firms, and from smaller firms to larger ones, we calculate five year gross and net job flow rates for these various types of establishments. This shows that the increasing share of service employment in large firms is not due to higher growth in larger firms. Seeking the dynamics behind the shift of employment to larger firms, we investigate how job flow rates are related to firm and establishment size, using alternative size classification methods. Gross job flow rates vary inversely with the age of establishments in services, as do net growth rates of surviving establishments, even after controlling for size. To help distinguish among the effects of age, firm size, and establishment size on gross and net job flows in services, multivariate regression analysis is used. We find that all gross job flow rates decline with increasing age of establishments when size and industry differences are controlled. Because the job destruction rate falls faster than the creation rate as age increases, net growth rates increase with age for services as a whole. Gross and net job creation also declines with increasing size of establishments, but destruction rates increase with size when controlling for age and industry differences. Firm size differences contribute little or nothing additional when we control for establishment size and age.
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THE MANUFACTURING PLANT OWNERSHIP CHANGE DATABASE: ITS CONSTRUCTION AND USEFULNESS
September 1998
Working Paper Number:
CES-98-16
The Center for Economic Studies, U. S. Bureau of the Census, has constructed the "Manufacturing Plant Ownership Change Database" (OCD)using plant-level data taken from the Census Bureau's Longitudinal Research Database (LRD). The OCD contains data on all manufacturing establishments that have experienced ownership change at least once during the period 1963-1992 . This is a unique data set which, together with the LRD, can be used to conduct a variety of economic studies that were not possible before. This paper describes how the OCD was constructed and discusses the usefulness of these data for economic research.
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Mergers and Acquisitions in the United States: 1990-1994
September 1998
Working Paper Number:
CES-98-15
Business merger and acquisition activity has been brisk in the United States in the recent past. Yet very little information has been available to help researchers understand the effects of this activity on jobs, businesses, and the American economy. This paper takes a first look at examining merger and acquisition activity using the newly available Longitudinal Establishment and Enterprise Microdata (LEEM) file. The analysis focuses on industries, establishments, and employment by employment size of firm. A first-time comparison of establishments that were acquired and survived over the 1990-1994 period with those that survived but were not acquired finds that the acquired establishments experienced more job change and, in the end, more net job loss than the nonacquired establishments. Establishments in small firms that were acquired by new or large firms experienced especially rapid job growth; however; job losses in establishments acquired from large firms more than offset these job gains.
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