Title

Structural Change Within Versus Across Firms: Evidence from the United States

Author(s)

Xiang Ding Xiang Ding (Harvard University)

Teresa C. Fort Teresa Fort (Tuck School of Business)

Stephen J. Redding Stephen Redding (Princeton University)

Peter K. Schott Peter Schott (Yale University)

Abstract

US manufacturing’s employment share fell from 27 to 9 percent between 1977 and 2016. A third of this reallocation is driven by a shift towards services – particularly professional services and retail – within continuing manufacturers. We show that firms with in-house professional service establishments are larger, grow faster, more likely to survive and more diversified than firms without such plants. These trends motivate a model of within-firm structural transformation in which non-manufacturing workers complement physical production, and where physical input price reductions induce firms to reallocate towards services. This mechanism is consistent with US firms’ responses to growing trade with China.

Creation Date

2019-09

Section URL ID

Paper Number

2019-9

URL

https://faculty.tuck.dartmouth.edu/images/uploads/faculty/teresa-fort/DFRS_Structural_Change.pdf

File Function

Jel

L11, L21, L25, L60

Keyword(s)

structural change, multi-product firms, globalization

Suppress

false

Series

13