Working Paper: CEPR ID: DP2463
Authors: Richard Disney; Jonathan Haskel; Ylva Heden
Abstract: We analyse productivity growth in UK manufacturing 1980-92 using the newly available ARD panel of establishments drawn from the Census of Production. We examine the relative importance of 'internal' restructuring (such as new technology and organizational change) and 'external' restructuring (the process by which less efficient establishments exit and more efficient establishments enter and increase market share). We find that (a) 'external restructuring' accounts for 50% of labour productivity growth and 90% of TFP growth over the period; (b) much of the external restructuring effect comes from multi-establishment firms closing down poorly-performing plants and opening high-performing new ones, and (c) external competition is an important determinant of internal restructuring.
Keywords: productivity; total factor productivity; restructuring; entry; exit; market selection
JEL Codes: L11; L60; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| external restructuring (L22) | labor productivity growth (O49) |
| external restructuring (L22) | total factor productivity (TFP) growth (O49) |
| closure of low-performing establishments (J65) | external restructuring (L22) |
| opening of high-performing establishments (L25) | external restructuring (L22) |
| competition (L13) | total factor productivity (TFP) growth (O49) |
| selection bias (C24) | overstate effect of competition on productivity growth (O49) |