Working Paper: CEPR ID: DP9331
Authors: Allan Collard-Wexler; Jan De Loecker
Abstract: We measure the impact of a drastic new technology for producing steel, the minimill, on the aggregate productivity of U.S. steel producers, using unique plant-level data between 1963 and 2002. We find that the sharp increase in the industry's productivity is linked to this new technology, and operates through two distinct mechanisms. First, minimills displaced the older technology, called vertically integrated production, and this reallocation of output was responsible for a third of the increase in the industry's productivity. Second, increased competition, due to the expansion of minimills, drove a substantial reallocation process within the group of vertically integrated producers, driving a resurgence in their productivity, and consequently of the industry's productivity as a whole.
Keywords: competition; productivity; reallocation; technology
JEL Codes: L1; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| minimills (L61) | productivity increase (O49) |
| increased competition from minimills (L19) | productivity improvements in vertically integrated plants (L23) |
| exit of less efficient producers (L11) | productivity improvements in vertically integrated plants (L23) |