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The U.S. Manufacturing Sector's Response to Higher Electricity Prices: Evidence from State-Level Renewable Portfolio Standards
October 2022
Working Paper Number:
CES-22-47
While several papers examine the effects of renewable portfolio standards (RPS) on electricity prices, they mainly rely on state-level data and there has been little research on how RPS policies affect manufacturing activity via their effect on electricity prices. Using plant-level data for the entire U.S. manufacturing sector and all electric utilities from 1992 ' 2015, we jointly estimate the effect of RPS adoption and stringency on plant-level electricity prices and production decisions. To ensure that our results are not sensitive to possible pre-existing differences across manufacturing plants in RPS and non-RPS states, we implement coarsened exact covariate matching. Our results suggest that electricity prices for plants in RPS states averaged about 2% higher than in non-RPS states, notably lower than prior estimates based on state-level data. In response to these higher electricity prices, we estimate that plant electricity usage declined by 1.2% for all plants and 1.8% for energy-intensive plants, broadly consistent with published estimates of the elasticity of electricity demand for industrial users. We find smaller declines in output, employment, and hours worked (relative to the decline in electricity use). Finally, several key RPS policy design features that vary substantially from state-to-state produce heterogeneous effects on plant-level electricity prices.
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Are firm-level idiosyncratic shocks important for U.S. aggregate volatility?
January 2017
Working Paper Number:
CES-17-23
This paper quantitatively assesses whether firm-specific shocks can drive the U.S. business cycle. Firm-specific shocks to the largest firms can directly contribute to aggregate fluctuations whenever the firm size distribution is fat-tailed giving rise to the granular hypothesis. I use a novel, comprehensive data set compiled from administrative sources that contains the universe of firms and trade transactions, and find that the granular hypothesis accounts at most for 16 percent of the variation in aggregate sales growth. This is about half of that found by previous studies that imposed Gibrat's law where all firms are equally volatile regardless of their size. Using the full distribution of growth rates among U.S. firms, I find robust evidence of a negative relationship between firm-level volatility and size, i.e. the size-variance relationship. The largest firms (whose shocks drive granularity) are the least volatile under the size-variance relationship, thus their influence on aggregates is mitigated. I show that by taking this relationship into account the effect of firm-specific shocks on observed macroeconomic volatility is substantially reduced. I then investigate several plausible mechanisms that could explain the negative sizevariance relationship. After empirically ruling out some of them, I suggest a 'market power' channel in which large firms face smaller price elasticities and therefore respond less to a givensized productivity shock than small firms do. I provide direct evidence for this mechanism by estimating demand elasticities among U.S. manufactures. Lastly, I construct an analytically tractable framework that is consistent with several empirical regularities related to firm size.
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Small Business Growth and Failure during the Great Recession: The Role of House Prices, Race & Gender
November 2016
Working Paper Number:
carra-2016-08
Using 2002-2011 data from the Longitudinal Business Database linked to the 2002 and 2007 Survey of Business Owners, this paper explores whether (through a collateral channel) the rise in home prices over the early 2000's and their subsequent fall associated with the Great Recession had differential impacts on business performance across owner race, ethnicity and gender. We find that the employment growth rate of minority-owned firms, particularly black and Hispanic-owned firms, is more sensitive to changes in house prices than is that of their nonminority-owned counterparts.
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Are firm-level idiosyncratic shocks important for U.S. aggregate volatility?
January 2016
Working Paper Number:
CES-16-47
This paper assesses the quantitative impact of firm-level idiosyncratic shocks on aggregate volatility in the U.S. economy and provides a microfoundation for the negative relationship between firm-level volatility and size. I argue that the role of firm-specific shocks through the granular channel plays a fairly limited role in the U.S. economy. Using a novel, comprehensive data set compiled from several sources of the U.S. Census Bureau, I find that the granular com-ponent accounts at most for 15.5% of the variation in aggregate sales growth which is about half found by previous studies. To bridge the gap between previous findings and mine, I show that my quantitative results require deviations from Gibrat's law in which firm-level volatility and size are negatively related. I find that firm-level volatility declines at a substantially higher rate in size than previously found. Hence, the largest firms in the economy cannot be driving a sub-stantial fraction of macroeconomic volatility. I show that the explanatory power of granularity gets cut by at least half whenever the size-variance relationship, as estimated in the micro-level data, is taken into account. To uncover the economic mechanism behind this phenomenon, I construct an analytically tractable framework featuring random growth and a Kimball aggrega-tor. Under this setup, larger firms respond less to productivity shocks as the elasticity of demand is decreasing in size. Additionally, the model predicts a positive (negative) relationship between firm-level mark-ups (growth) and size. I confirm the predictions of the model by estimating size-varying price elasticities on unique product-level data from the Census of Manufactures (CM) and structurally estimating mark-ups using plant-level information from the Annual Survey of Manufactures (ASM).
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LEHD Infrastructure files in the Census RDC - Overview
June 2014
Working Paper Number:
CES-14-26
The Longitudinal Employer-Household Dynamics (LEHD) Program at the U.S. Census Bureau, with the support of several national research agencies, maintains a set of infrastructure files using administrative data provided by state agencies, enhanced with information from other administrative data sources, demographic and economic (business) surveys and censuses. The LEHD Infrastructure Files provide a detailed and comprehensive picture of workers, employers, and their interaction in the U.S. economy. This document describes the structure and content of the 2011 Snapshot of the LEHD Infrastructure files as they are made available in the Census Bureaus secure and restricted-access Research Data Center network. The document attempts to provide a comprehensive description of all researcher-accessible files, of their creation, and of any modifcations made to the files to facilitate researcher access.
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Do EPA Regulations Affect Labor Demand? Evidence From the Pulp and Paper Industry
August 2013
Working Paper Number:
CES-13-39
The popular belief is that environmental regulation must reduce employment, since suchregulations are expected to increase production costs, which would raise prices and thus reducedemand for output, at least in a competitive market. Although this effect might seem obvious, a careful microeconomic analysis shows that it is not guaranteed. Even if environmental regulation reduces output in the regulated industry, abating pollution could require additional labor (e.g. to monitor the abatement capital and meet EPA reporting requirements). It is also possible for pollution abatement technologies to be labor enhancing. In this paper we analyze how a particular EPA regulation, the so-called 'Cluster Rule' (CR) imposed on the pulp and paper industry in 2001, affected employment in that sector. Using establishment level data from the Census of Manufacturers and Annual Survey of Manufacturers at the U.S. Census Bureau from 1992-2007 we find evidence of small employment declines (on the order of 3%-7%), which are sometimes statistically significant, at a subset of the plants covered by the CR.
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INTRA-FIRM TRADE AND PRODUCT CONTRACTIBILITY
March 2013
Working Paper Number:
CES-13-12
This paper examines the determinants of intra-firm trade in U.S. imports using detailed country-product data. We create a new measure of product contractibility based on the degree of intermediation in international trade for the product. We find important roles for the interaction of country and product characteristics in determining intra-firm trade shares. Intra- firm trade is high for products with low levels of contractibility sourced from countries with weak governance, for skill-intensive products from skill-scarce countries, and for capital-intensive products from capital-abundant countries.
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LEHD Data Documentation LEHD-OVERVIEW-S2008-rev1
December 2011
Working Paper Number:
CES-11-43
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Impacts of Central Business District Location: A Hedonic Analysis of Legal Service Establishments
July 2011
Working Paper Number:
CES-11-21
This analysis examines the business impacts on law firms of locating in Central Business Districts (CBDs) in major U.S. cities. Specifically, we measure the price premium that law firms pay to locate in CBDs. Using micro-level data from the 1992 and 2007 Census of Services, we find that after controlling for firm size, firm specialization characteristics, and MSA and county attributes, law firms within CBDs pay about 15 to 20 percent more in overhead compared to those firms outside CBDs ' a result consistent across time between 1992 and 2007. When including an important additional measure of firm quality, however, we find that this impact is reduced to about 7 to 9 percent, but still statistically significant. Additional results show that there is a significant correlation between firm quality and CBD location. We also find that firm size and firm specialization measures are important factors in the choice to locate within CBDs. We argue that these results indicate that CBD location for law firms may serve as networking, quality sorting, and branding mechanisms.
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LEHD Infrastructure Files in the Census RDC: Overview of S2004 Snapshot
April 2011
Working Paper Number:
CES-11-13
The Longitudinal Employer-Household Dynamics (LEHD) Program at the U.S. Census Bureau, with the support of several national research agencies, has built a set of infrastructure files using administrative data provided by state agencies, enhanced with information from other administrative data sources, demographic and economic (business) surveys and censuses. The LEHD Infrastructure Files provide a detailed and comprehensive picture of workers, employers, and their interaction in the U.S. economy. This document describes the structure and content of the 2004 Snapshot of the LEHD Infrastructure files as they are made available in the Census Bureau's Research Data Center network.
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