Abstract
In this paper the survivor technique is employed to study American manufacturing establishments in four-digit SIC industries. A major finding is that “down-sizing” during the late 1980s is more than anecdotal. Survivor estimates of economies of scale using the 1987 and 1992 Censuses of Manufactures clearly illustrate a general movement toward smaller scales. Moving beyond prior survivor studies, the sources of changes in scale are investigated. However, increases in either number of establishments or value added had a statistically significant effect on the occurrence of a change in scale, respectively decreasing or increasing the likelihood of change. The HHI of the industry also had a significant positive effect on the likelihood of a significant change in scale of output.
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Notes
In the modern economy where firms are significantly diversified in terms of both products and geographic distribution of production, the plant or “establishment” is the appropriate unit to examine for survivorship behavior. According to the Census’ definition, an establishment is a single physical location of production activities.
The vagaries of transfer pricing that is applied to shipments between the establishments that belong to the same company may dampen such consequences.
Giordano (2003) specifies output homogeneity as a requirement for survivor analysis. However, differentiation through location of production, among other things, is so pervasive that a truly homogeneous output is probably non-existent.
At the 90% significance level, approximately 30 additional industries were found to have experienced measurable changes in their distribution. This was true for all three distributions.
Individual industry performance is illustrated in Table A1 in the appendix that is available from the author upon request.
Value Added, Value of Shipments, and Value Added per Production Worker were all deflated by the PPI-Manufacturing value for December 1987 and 1992.
At the editor’s suggestion, a multinomial logit was run with dependent variable values, 0 = no change, 1 = statistical change without obvious scale change, 2 = decreased scale through either reduced percentage share of largest size classes or median scale of output reduction, 3 = increased scale with either increased percentage share of largest size classes or median scale of output increased. The results are available from the author but do not significantly improve upon the results reported below.
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Brown, J.H. Establishment Survivorship in U.S. Manufacturing, 1987–1992. Rev Ind Organ 53, 347–366 (2018). https://doi.org/10.1007/s11151-018-9613-4
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DOI: https://doi.org/10.1007/s11151-018-9613-4