Complementarities in Automobile Production

46 Pages Posted: 18 May 2006 Last revised: 26 Aug 2010

See all articles by Johannes Van Biesebroeck

Johannes Van Biesebroeck

K.U.Leuven; Centre for Economic Policy Research (CEPR)

Date Written: April 2006

Abstract

The number of different car and light truck models produced in North America has increased enormously over the last decades. The data suggests that producing this increased variety of vehicles is associated with a productivity penalty. We show that manufacturers can adopt complementary activities to reduce this penalty. Flexible technology, defined as the ability to assemble models derived from different %u201Cplatforms%u201D on the same assembly line, and bringing previously outsourced activities in-house are two such activities that we identify. Both are costly themselves, in terms of lower productivity, but they reduce the cost of producing greater variety. The results are robust to controlling for the endogeneity of the adoption decisions using activity-specific instruments, as proposed by Athey and Stern (2003).

Suggested Citation

Van Biesebroeck, Johannes, Complementarities in Automobile Production (April 2006). NBER Working Paper No. w12131. Available at SSRN: https://ssrn.com/abstract=896205

Johannes Van Biesebroeck (Contact Author)

K.U.Leuven ( email )

Naamsestraat 69
B-3000 Leuven
Belgium
+3216326793 (Phone)
+3216326796 (Fax)

HOME PAGE: http://www.econ.kuleuven.be/public/N07057/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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