The Life Cycle of Plants in India and Mexico

44 Pages Posted: 8 Jun 2012 Last revised: 27 Oct 2014

See all articles by Peter J. Klenow

Peter J. Klenow

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

Chang-Tai Hsieh

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

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Date Written: June 2012

Abstract

In the U.S., the average 40 year old plant employs almost eight times as many workers as the typical plant five years or younger. In contrast, surviving Indian plants exhibit little growth in terms of either employment or output. Mexico is intermediate to India and the U.S. in these respects: the average 40 year old Mexican plant employs twice as many workers as an average new plant. This pattern holds across many industries and for formal and informal establishments alike. The divergence in plant dynamics suggests lower investments by Indian and Mexican plants in process efficiency, quality, and in accessing markets at home and abroad. In simple GE models, we find that the difference in life cycle dynamics could lower aggregate manufacturing productivity on the order of 25% in India and Mexico relative to the U.S.

Suggested Citation

Klenow, Peter J. and Hsieh, Chang-Tai, The Life Cycle of Plants in India and Mexico (June 2012). NBER Working Paper No. w18133. Available at SSRN: https://ssrn.com/abstract=2079877

Peter J. Klenow

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Chang-Tai Hsieh

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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