The Dynamics of Productivity in the Telecommunications Equipment Industry
61 Pages Posted: 21 Nov 2007 Last revised: 14 Nov 2022
Date Written: January 1992
Abstract
Technological change and deregulation have caused a major restructuring of the telecommunications equipment industry over the last two decades. We estimate the parameters of a production function for the equipment industry and then use those estimates to analyze the evolution of plant level productivity over this period. The restructuring involved significant entry and exit and large changes in the sizes of incumbents. Since firms' choices on whether to liquidate and on the quantities of inputs demanded should they continue depend on their productivity, we use an equilibrium model to suggest an estimation algorithm that takes into account the relationship between productivity on the one hand. and both input demand and survival on the other. A fully parametric version of the estimation algorithm would be both computationally burdensome and require a host of auxiliary assumptions. So we develop a semi parametric technique which is both consistent with a quite general version of the theoretical framework and easy to use. The algorithm produces markedly different estimates of both production function parameters and of productivity movements than traditional estimation procedures. We find an increase in the rate of industry productivity growth after deregulation. This in spite of the fact there was no increase in the average of the plants' rates of productivity growth, and there was actually a fall in our index of the efficiency of the allocation of variable factors conditional on the existing distribution of fixed factors. Deregulation was, however, followed by a reallocation of capital towards more productive establishments (by a down sizing, often shutdown. of unproductive plants and by disproportionate growth of productive establishments) which more than offset the other factors' negative impacts on aggregate productivity.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity
-
The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity
-
Plants and Productivity in International Trade
By Andrew B. Bernard, Jonathan Eaton, ...
-
Plants and Productivity in International Trade
By Andrew B. Bernard, Jonathan Eaton, ...
-
Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants
By Nina Pavcnik
-
Is "Learning-by-Exporting" Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco
By Sofronis Clerides, Saul Lach, ...
-
Aggregate Productivity Growth: Lessons from Microeconomic Evidence
By Lucia Foster, John Haltiwanger, ...
-
Estimating Production Functions Using Inputs to Control for Unobservables
By James A. Levinsohn and Amil Petrin
-
Plant- and Firm-Level Evidence on "New" Trade Theories
By James Tybout