The Dynamics of Plant-level Productivity in U.S. Manufacturing

Recent work in I.O. has emphasized the importance of firmand plant-level heterogeneity in total factor productivity. In this paper, we estimate establishmentlevel productivity for the entire U.S. manufacturing sector from 1976 until 1999 by using the Census Bureau’s Longitudinal Research Database combined with the Bureau’s Longitudinal Business Database. We characterize the time series properties of establishment-level idiosyncratic shocks to productivity, taking into account aggregate economy-wide and industry-level shocks. We use simulated method of moments estimation to control for short sample bias and to isolate estimation errors University of Rochester, Department of Economics. Contact: [email protected]. Phone: 585-275-5273 Fax: 585-256-2309 U.S. Bureau of the Census. Contact: [email protected]. Phone: 919-660-6893. Fax: 919-6848974. The research in this paper was conducted while the second author was an employee of the U.S. Census Bureau at the Triangle Census Research Data Center. Research results and conclusions expressed are those of the authors and do not necessarily reflect the views of the Census Bureau. This paper has been screened to insure that no confidential data are revealed. We thank participants at the Society for Economic Dynamics Meetings, the Society for Computational Economics conference, the Census Bureau Center for Economic Studies’ Seminar, the Annual Census CES-RDC Meetings in Ann Arbor, Michigan, and New York, and seminars at Duke and Maryland for helpful comments. We would also like to thank Craig Burnside, Mark Doms, John Haltiwanger, Ron Jarmin, and Jeong-Joon Lee for their detailed comments. We thank Yoonsoo Lee for sending us his programs for comparison, Lucia Foster for help with comparisons to Foster, Haltiwanger, and Syverson (2005), Hyowook Chiang and Wayne Gray for help with the deflators datasets, and Jerry Reiter for advice on multiple imputation.