Structural change within versus across firms: evidence from the United States

Ding, Xiang, Fort, Teresa C., Redding, Stephen and Schott, Peter K. (2022) Structural change within versus across firms: evidence from the United States. CEP Discussion Papers (CEPDP1852). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We document the role of intangible capital in manufacturing firms' substantial contribution to non-manufacturing employment growth from 1977-2019. Exploiting data on firms' "auxiliary" establishments, we develop a novel measure of proprietary in-house knowledge and show that it is associated with increased growth and industry switching. We rationalize this reallocation in a model where firms combine physical and knowledge inputs as complements, and where producing the latter in-house confers a sector-neutral productivity advantage facilitating within-firm structural transformation. Consistent with the model, manufacturing firms with auxiliary employment pivot towards services in response to a plausibly exogenous decline in their physical input prices.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2022 The Authors
Divisions:	LSE Centre for Economic Performance
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HB Economic Theory
JEL classification:	D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure; Industrial Price Indices O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
Date Deposited:	13 Jan 2023 13:42
Last Modified:	20 Feb 2024 15:57
URI:	http://eprints.lse.ac.uk/id/eprint/117886

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