The Life Cycle of Plants in India and Mexico

44 Pages Posted: 23 Jan 2013

See all articles by Chang-Tai Hsieh

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)

Multiple version iconThere are 3 versions of this paper

Date Written: December 1, 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

Hsieh, Chang-Tai and Klenow, Peter J., The Life Cycle of Plants in India and Mexico (December 1, 2012). US Census Bureau Center for Economic Studies Paper No. CES-WP- 12-20. Available at SSRN: https://ssrn.com/abstract=2201810 or http://dx.doi.org/10.2139/ssrn.2201810

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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Berkeley, CA 94720-3880
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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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579 Serra Mall
Stanford, CA 94305-6072
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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