The Life Cycle of Plants in India and Mexico

56 Pages Posted: 30 Sep 2011  

Chang-Tai Hsieh

University of Chicago - Booth School of Business; University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Peter J. Klenow

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: September 29, 2011

Abstract

In the U.S., manufacturing plants grow or die. In contrast, surviving Indian plants exhibit little growth in terms of either employment or output. Indian plants start smaller and stay smaller. Most Indian manufacturing employment is at informal plants with fewer than 10 workers. In the U.S. most workers are at plants with more than 800 workers. Mexico is intermediate to India and the U.S. in these respects. The divergence in plant dynamics could reflect lower investments by Indian and Mexican plants in accessing markets (at home and abroad) and in process efficiency, quality, and variety. In simple GE models, we find that the difference in life cycle dynamics could lower aggregate manufacturing productivity on the order of 25%.

Suggested Citation

Hsieh, Chang-Tai and Klenow, Peter J., The Life Cycle of Plants in India and Mexico (September 29, 2011). Chicago Booth Research Paper No. 11-38, 2011. Available at SSRN: https://ssrn.com/abstract=1935473 or http://dx.doi.org/10.2139/ssrn.1935473

Chang-Tai Hsieh (Contact Author)

University of Chicago - Booth School of Business ( email )

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University of California, Berkeley - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Peter J. Klenow

Stanford University - Department of Economics ( email )

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Stanford, CA 94305-6072
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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