Working Paper: NBER ID: w18133
Authors: Changtai Hsieh; Peter J. Klenow
Abstract: In the U.S., the average 40 year old plant employs almost eight times as many workers as the typical plant five years or younger. In contrast, surviving Indian plants exhibit little growth in terms of either employment or output. Mexico is intermediate to India and the U.S. in these respects: the average 40 year old Mexican plant employs twice as many workers as an average new plant. This pattern holds across many industries and for formal and informal establishments alike. The divergence in plant dynamics suggests lower investments by Indian and Mexican plants in process efficiency, quality, and in accessing markets at home and abroad. In simple GE models, we find that the difference in life cycle dynamics could lower aggregate manufacturing productivity on the order of 25% in India and Mexico relative to the U.S.
Keywords: plant dynamics; aggregate productivity; manufacturing; India; Mexico
JEL Codes: D24; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| plant age (Q16) | employment growth (O49) |
| age (J14) | productivity (O49) |
| lower lifecycle growth (D25) | aggregate manufacturing productivity (E23) |
| lower investments in intangible capital (E22) | lower lifecycle growth (D25) |
| higher operational costs (D24) | lower lifecycle growth (D25) |