, Volume 45, Issue 1, pp 157-178,
Open Access This content is freely available online to anyone, anywhere at any time.
Date: 26 Apr 2012

Linking investment spikes and productivity growth

Abstract

We investigate the relationship between productivity growth and investment spikes using Census Bureau’s plant-level dataset for the U.S. food manufacturing industry. There are differences in productivity growth and investment spike patterns across different sub-industries and food manufacturing industry in general. Our study finds empirical support for the learning-by-doing hypothesis by identifying some cases where the impact of investment spikes on TFP growth presents a U-shaped investment age–productivity growth pattern. However, efficiency and the learning period associated with investment spikes differ among plants across industries. The most pronounced impact of investment age on productivity growth (5.3 % for meat products, 4% for dairy products, and 2.8 % in all food manufacturing plants) occurs during the fifth year of post-investment spike. Thus, in general, the productivity gains tend to be fully realized with a 5-year technology learning period for this industry.

The research in this paper was conducted while the first author was a special sworn status researcher of the U.S. Census Bureau at the Michigan Census Research Data Center. Research results and conclusions expressed herein are solely the authors’, and do not necessarily reflect the views of the Census Bureau. This paper has been screened to ensure that no confidential data has been revealed.