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Wage and productivity stability in U.S. manufacturing plants
Mark C. Long, Kristin M. Dziczek, Daniel D. Luria, and Edith A. Wiarda
Manufacturing plants vary considerably, even within industries. Consequently, the “representative plant” view of the economy, which contends that all plants within an industry face the same technological changes and respond similarly, is likely mistaken.1 Previous work using the U.S. Census Bureau’s Longitudinal Research Database2 has demonstrated considerable plant-level heterogeneity in productivity and wages, even within narrowly defined industries.3 Further, the data indicate the presence of “plant effects” that persist over time.4 The implication is that unobserved, long-term, plant-specific factors—perhaps including the size and nature of a plant’s capital endowment, as well as its managerial skills and approach—play a sizable role in determining productivity and wage levels.
The nature of these plant-specific effects is of interest to anyone concerned with microlevel programs aimed at improving the performance of U.S. manufacturers. For example, the Manufacturing Extension Partnership of the National Institute of Standards and Technology aims to boost the performance of the small-firm segment of the U.S. manufacturing economy through assessment, training, and technical assistance. This and similar efforts, however, beg important questions with regard to plants’ productivity or wage dynamics—for example, Are large improvements realistic? How often do plants make relatively large movements within their industry? and Over what period of time do they effect such movements?
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Footnotes
1
Eric J. Bartelsman and Phoebus J. Dhrymes, “Productivity Dynamics: U.S. Manufacturing Plants, 1972–1986,” Journal of Productivity Analysis, January 1998, pp. 5–34.
2 The Longitudinal Research Database contains data on manufacturing establishments collected in 1963 and every 5 years since 1967. Further discussion of these data and their development can be found in George Pascoe and Robert McGuckin, “The Longitudinal Research Database (LRD): Status and Research Possibilities,” Working Paper 88–2 (U.S. Census Bureau, Center for Economic Studies, July 1, 1988).
3 Lucia Foster, John Haltiwanger, and C. J. Krizan, “Aggregate Productivity Growth: Lessons from Microeconomic Evidence,” NBER Working Paper No. 6803, November 1998.
4 Martin N. Baily, Charles Hulten, and David Campbell, “Productivity Dynamics in Manufacturing Plants,” Brookings Papers on Economic Activity: Microeconomics (Washington, DC, Brookings Institution, 1992), pp. 187–249; and Douglas W. Dwyer, “Whittling Away at Productivity Dispersion,” CES Working Papers, CES-WP-95–5 (U.S. Census Bureau, Office of the Chief Economist, 1995).
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