CES-WP-08-37
Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?
Edward Glaeser, William Kerr
October 01, 2008
Why are some places more entrepreneurial than others? We use Census Bureau data to
study local determinants of manufacturing startups across cities and industries. Demo- graphics
have limited explanatory power. Overall levels of local customers and suppliers are only
modestly important, but new entrants seem particularly drawn to areas with many smaller
suppliers, as suggested by Chinitz (1961). Abundant workers in relevant occupations also
strongly predict entry. These forces plus city and industry fixed effects explain between sixty
and eighty percent of manufacturing entry. We use spatial distributions of natural cost
advantages to address partially endogeneity concerns.
 View Paper 52 Pages 377518 Bytes
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CES-WP-08-36
Linking Investment Spikes and Productivity Growth: U.S. Food Manufacturing Industry
Pinar Celikkol Geylani, Spiro Stefanou
October 01, 2008
We investigate the relationship between productivity growth and investment spikes using
Census Bureau’s plant-level data set for the U.S. food manufacturing industry. We find that
productivity growth increases after investment spikes suggesting an efficiency gain or plants’
learning effect. However, efficiency and the learning period associated with investment spikes
differ among plants’ productivity quartile ranks implying the differences in the plants’
investment types such as expansionary, replacement or retooling. We find evidence of both
convex and non-convex types of adjustment costs where lumpy plant-level investments suggest
the possibility of non-convex adjustment costs and hazard estimation results suggest the
possibility of convex adjustment costs. The downward sloping hazard can be due to the
unobserved heterogeneity across plants such as plants’ idiosyncratic obsolescence caused by
different R&D capabilities and implies the existence of convex adjustment costs. Food plants
frequently invest during their first few years of operation and high productivity plants postpone
investing due to high fixed costs.
View Paper 52 Pages 243480 Bytes
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CES-WP-08-35
The Effects of Smoking in Young Adulthood on Smoking and Health Later in Life: Evidence Based on the Vietnam Era Draft Lottery
Daniel Eisenberg, Brian Rowe
September 01, 2008
An important, unresolved question for health policymakers and consumers is whether
cigarette smoking in young adulthood has significant lasting effects into later adulthood. The
Vietnam era draft lottery offers an opportunity to address this question, because it randomly
assigned young men to be more likely to experience conditions favoring cigarette consumption,
including highly subsidized prices. Using this natural experiment, we find that military service
increased the probability of smoking by 35 percentage points as of 1978-80, when men in the
relevant cohorts were aged 25-30, but later in adulthood this effect was substantially attenuated
and did not lead to large negative health effects.
View Paper 39 Pages 269602 Bytes
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CES-WP-08-34
The Green Industry: An Examination of Environmental Products Manufacturing
Randy Becker, Ronald Shadbegian
September 01, 2008
The “green industry” is often noted in discussions of the costs and benefits of
environmental policy, and it has been characterized as a unique industry with substantial
potential for employment growth, well-paying jobs, and export opportunities. In this paper, we
examine the characteristics and recent economic performance of the green industry, using
establishment-level data on environmental products manufacturers (EPMs) from the 1995
Survey of Environmental Products and Services, together with data from the Annual Survey of
Manufactures and various Census of Manufactures. Results suggest that there are some
differences between EPMs and their non-EPM counterparts in the same industry, in terms of
employment, employee compensation, exports, and productivity. However, we do not find any
evidence that EPMs performed any better than otherwise similar plants, in terms of survival,
employment growth, wage growth, and export growth. Our findings offer a more complex and
nuanced portrayal of the green industry than is typical, and we suggest that this industry may not
be as exceptional as is sometimes maintained.
View Paper 39 Pages 246759 Bytes
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CES-WP-08-33
Productivity Dispersion and Input Prices: The Case of Electricity
Steven Davis, Cheryl Grim, John Haltiwanger
September 01, 2008
We exploit a rich new database on Prices and Quantities of Electricity in Manufacturing
(PQEM) to study electricity productivity in the U.S. manufacturing sector. The database contains
nearly 2 million customer-level observations (i.e., manufacturing plants) from 1963 to 2000. It
allows us to construct plant-level measures of price paid per kWh, output per kWh, output per
dollar spent on electric power and labor productivity. Using this database, we first document
tremendous dispersion among U.S. manufacturing plants in electricity productivity measures and
a strong negative relationship between price per kWh and output per kWh hour within narrowly
defined industries. Using an IV strategy to isolate exogenous price variation, we estimate that the
average elasticity of output per kWh with respect to the price of electricity is about 0.6 during
the period from 1985 to 2000. We also develop evidence that this price-physical efficiency
tradeoff is stronger for industries with bigger electricity cost shares. Finally, we develop
evidence that stronger competitive pressures in the output market lead to less dispersion among
manufacturing plants in price per kWh and in electricity productivity measures. The strength of
competition effects on dispersion is similar for electricity productivity and labor productivity.
View Paper 41 Pages 323005 Bytes
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CES-WP-08-32
A Comparison of Employee Benefits Data from the MEPS-IC and Form 5500
Kristin McCue
September 01, 2008
This paper compares data on employers’ health and pension offerings from the two
sources: publicly available administrative data from Form 5500 filings and survey data from the
Insurance Component of the Medical Expenditure Panel Survey (MEPS-IC). The basic findings
are that the 5500 filings cover too few health plans to be very useful as a substitute or
supplement to the MEPS-IC measure of whether or not employers offer health insurance. The
pension information in the 5500 filings is potentially more useful as a supplement to the MEPSIC
for research purposes where additional pension information would be useful in studying
employers’ decisions to offer health insurance.
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View Paper 18 Pages 382235 Bytes
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CES-WP-08-31
The Direct and Indirect Costs of Food Safety Regulation
Michael Ollinger
September 01, 2008
The cost of compliance with the Pathogen Reduction Hazard Analysis Critical Control
Program (PR/HACCP) rule of 1996 has been controversial since it was first proposed. Surveys
have provided some cost information but examined plant size and other indirect effects with
limited data and did not make cost estimates of direct cost components, such as mandated tasks.
This paper addresses those deficiencies with data from a national survey of meat and poultry
plants on PR/HACCP costs. Results indicate that (1) mandated tasks are the most costly
component of the PR/HACCP rule, (2) regulation favors large plants over small ones, and (3)
private actions are nearly as costly as direct regulation.
View Paper 32 Pages 215283 Bytes
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CES-WP-08-30
Computer Network Use and Firms' Productivity Performance: The United States vs. Japan
B.K. Atrostic, Kazuyuki Motohashi, Sang Nguyen
September 01, 2008
This paper examines the relationship between computer network use and firms’
productivity performance, using micro-data of the United States and Japan. To our knowledge,
this is the first comparative analysis using firm-level data for the manufacturing sector of both
countries. We find that the links between IT and productivity differ between U.S. and Japanese
manufacturing. Computer networks have positive and significant links with labor productivity in
both countries. However, that link is roughly twice as large in the U.S. as in Japan. Differences
in how businesses use computers have clear links with productivity for U.S. manufacturing, but
not in Japan. For the United States, the coefficients of the intensity of network use are positive
and increase with the number of processes. Coefficients of specific uses of those networks are
positive and significant. None of these coefficients are significant for Japan. Our findings are
robust to alternative econometric specifications. They also are robust to expanding our sample
from single-unit manufacturing firms, which are comparable in the two data sets, to the entire
manufacturing sector in each country, as well as to the wholesale and retail sector of Japan.
View Paper 38 Pages 330743 Bytes
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CES-WP-08-29
Transfer Pricing by U.S.-Based Multinational Firms
Andrew Bernard, J. Bradford Jensen, Peter Schott
September 01, 2008
This paper examines how prices set by multinational firms vary across arm’s-length and
related party customers. Comparing prices within firms, products, destination countries, modes
of transport and month, we find that the prices U.S. exporters set for their arm’s-length
customers are substantially larger than the prices recorded for related-parties. This price wedge
is smaller for commodities than for differentiated goods, is increasing in firm size and firm
export share, and is greater for goods sent to countries with lower corporate tax rates and higher
tariffs. We also find that changes in exchange rates have differential effects on arm’s-length and
related-party prices; an appreciation of the dollar reduces the difference between the prices.
View Paper 37 Pages 368814 Bytes
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CES-WP-08-28
An Analysis of Key Differences in Micro Data: Results from the Business List Comparison Project
Kristin Fairman, Lucia Foster, C.J. Krizan, Ian Rucker
September 01, 2008
The Bureau of Labor Statistics and the Bureau of the Census each maintain a business
register, a universe of all U.S. business establishments and their characteristics, created from
independent sources. Both registers serve critical functions such as supplying aggregate data
inputs for certain national statistics generated by the Bureau of Economic Analysis. This paper
examines key micro-level differences across these two business registers.
View Paper 10 Pages 102427 Bytes
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