CES-WP-08-41
Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices
Ali Hortacsu, Chad Syverson
December 01, 2008
This paper empirically investigates the possible market power effects of vertical
integration proposed in the theoretical literature on vertical foreclosure. It uses a rich data set of
cement and ready-mixed concrete plants that spans several decades to perform a detailed case
study. There is little evidence that foreclosure is quantitatively important in these industries.
Instead, prices fall, quantities rise, and entry rates remain unchanged when markets become more
integrated. These patterns are consistent, however, with an alternative efficiency-based
mechanism. Namely, higher productivity producers are more likely to vertically integrate and are
also larger, more likely to survive, and charge lower prices. We find evidence that integrated
producers’ productivity advantage is tied to improved logistics coordination afforded by large
local concrete operations. Interestingly, this benefit is not due to firms’ vertical structures per se:
non-vertical firms with large local concrete operations have similarly high productivity levels.
View Paper 61 Pages 221520 Bytes
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CES-WP-08-40
Manufacturing Plants' Use of Temporary Workers: An Analysis Using Census Micro Data
Yukako Ono, Daniel Sullivan
December 01, 2008
Using plant-level data from the Plant Capacity Utilization (PCU) Survey, we examine
how manufacturing plants’ use of temporary workers is associated with the nature of their output
fluctuations and other plant characteristics. We find that plants tend to hire temporary workers
when their output can be expected to fall, a result consistent with the notion that firms use
temporary workers to reduce costs associated with dismissing permanent employees. In addition,
we find that plants whose future output levels are subject to greater uncertainty tend to use more
temporary workers. We also examine the effects of wage and benefit levels for permanent
workers, unionization rates, turnover rates, seasonal factors, and plant size and age on the use of
temporary workers; based on our results, we discuss various views of why firms use temporary
workers.
View Paper 41 Pages 193401 Bytes
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CES-WP-08-39
Gender Differences in Business Performance: Evidence from the Characteristics of Business Owners Survey
Robert Fairlie, Alicia Robb
December 01, 2008
Using confidential microdata from the U.S. Census Bureau, we investigate the
performance of female-owned businesses making comparisons to male-owned businesses. Using
regression estimates and a decomposition technique, we explore the role that human capital,
especially through prior work experience, and financial capital play in contributing to why
female-owned businesses have lower survival rates, profits, employment and sales. We find that
female-owned businesses are less successful than male-owned businesses because they have less
startup capital, and business human capital acquired through prior work experience in a similar
business and prior work experience in family business. We also find some evidence that femaleowned
businesses work fewer hours and may have different preferences for the goals of their
business.
View Paper 51 Pages 144184 Bytes
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CES-WP-08-38
Measuring Labor Earnings Inequality Using Public-Use March Current Population Survey Data: The Value of Including Variances and Cell Means When Imputing Topcoded Values
Richard Burkhauser, Shuaizhang Feng, Jeff Larrimore
November 01, 2008
Using the Census Bureau’s internal March Current Population Surveys (CPS) file, we
construct and make available variances and cell means for all topcoded income values in the publicuse
version of these data. We then provide a procedure that allows researchers with access only to
the public-use March CPS data to take advantage of this added information when imputing its
topcoded income values. As an example of its value we show how our new procedure improves on
existing imputation methods in the labor earnings inequality literature.
View Paper 39 Pages 230095 Bytes
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CES-WP-08-37
Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?
Edward Glaeser, William Kerr
October 01, 2008
Why are some places more entrepreneurial than others? We use Census Bureau data to
study local determinants of manufacturing startups across cities and industries. Demo- graphics
have limited explanatory power. Overall levels of local customers and suppliers are only
modestly important, but new entrants seem particularly drawn to areas with many smaller
suppliers, as suggested by Chinitz (1961). Abundant workers in relevant occupations also
strongly predict entry. These forces plus city and industry fixed effects explain between sixty
and eighty percent of manufacturing entry. We use spatial distributions of natural cost
advantages to address partially endogeneity concerns.
View Paper 52 Pages 377518 Bytes
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CES-WP-08-36
Linking Investment Spikes and Productivity Growth: U.S. Food Manufacturing Industry
Pinar Celikkol Geylani, Spiro Stefanou
October 01, 2008
We investigate the relationship between productivity growth and investment spikes using
Census Bureau’s plant-level data set for the U.S. food manufacturing industry. We find that
productivity growth increases after investment spikes suggesting an efficiency gain or plants’
learning effect. However, efficiency and the learning period associated with investment spikes
differ among plants’ productivity quartile ranks implying the differences in the plants’
investment types such as expansionary, replacement or retooling. We find evidence of both
convex and non-convex types of adjustment costs where lumpy plant-level investments suggest
the possibility of non-convex adjustment costs and hazard estimation results suggest the
possibility of convex adjustment costs. The downward sloping hazard can be due to the
unobserved heterogeneity across plants such as plants’ idiosyncratic obsolescence caused by
different R&D capabilities and implies the existence of convex adjustment costs. Food plants
frequently invest during their first few years of operation and high productivity plants postpone
investing due to high fixed costs.
View Paper 52 Pages 243480 Bytes
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CES-WP-08-35
The Effects of Smoking in Young Adulthood on Smoking and Health Later in Life: Evidence Based on the Vietnam Era Draft Lottery
Daniel Eisenberg, Brian Rowe
September 01, 2008
An important, unresolved question for health policymakers and consumers is whether
cigarette smoking in young adulthood has significant lasting effects into later adulthood. The
Vietnam era draft lottery offers an opportunity to address this question, because it randomly
assigned young men to be more likely to experience conditions favoring cigarette consumption,
including highly subsidized prices. Using this natural experiment, we find that military service
increased the probability of smoking by 35 percentage points as of 1978-80, when men in the
relevant cohorts were aged 25-30, but later in adulthood this effect was substantially attenuated
and did not lead to large negative health effects.
View Paper 39 Pages 269602 Bytes
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CES-WP-08-34
The Green Industry: An Examination of Environmental Products Manufacturing
Randy Becker, Ronald Shadbegian
September 01, 2008
The “green industry” is often noted in discussions of the costs and benefits of
environmental policy, and it has been characterized as a unique industry with substantial
potential for employment growth, well-paying jobs, and export opportunities. In this paper, we
examine the characteristics and recent economic performance of the green industry, using
establishment-level data on environmental products manufacturers (EPMs) from the 1995
Survey of Environmental Products and Services, together with data from the Annual Survey of
Manufactures and various Census of Manufactures. Results suggest that there are some
differences between EPMs and their non-EPM counterparts in the same industry, in terms of
employment, employee compensation, exports, and productivity. However, we do not find any
evidence that EPMs performed any better than otherwise similar plants, in terms of survival,
employment growth, wage growth, and export growth. Our findings offer a more complex and
nuanced portrayal of the green industry than is typical, and we suggest that this industry may not
be as exceptional as is sometimes maintained.
View Paper 39 Pages 246759 Bytes
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CES-WP-08-33
Productivity Dispersion and Input Prices: The Case of Electricity
Steven Davis, Cheryl Grim, John Haltiwanger
September 01, 2008
We exploit a rich new database on Prices and Quantities of Electricity in Manufacturing
(PQEM) to study electricity productivity in the U.S. manufacturing sector. The database contains
nearly 2 million customer-level observations (i.e., manufacturing plants) from 1963 to 2000. It
allows us to construct plant-level measures of price paid per kWh, output per kWh, output per
dollar spent on electric power and labor productivity. Using this database, we first document
tremendous dispersion among U.S. manufacturing plants in electricity productivity measures and
a strong negative relationship between price per kWh and output per kWh hour within narrowly
defined industries. Using an IV strategy to isolate exogenous price variation, we estimate that the
average elasticity of output per kWh with respect to the price of electricity is about 0.6 during
the period from 1985 to 2000. We also develop evidence that this price-physical efficiency
tradeoff is stronger for industries with bigger electricity cost shares. Finally, we develop
evidence that stronger competitive pressures in the output market lead to less dispersion among
manufacturing plants in price per kWh and in electricity productivity measures. The strength of
competition effects on dispersion is similar for electricity productivity and labor productivity.
View Paper 41 Pages 323005 Bytes
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CES-WP-08-32
A Comparison of Employee Benefits Data from the MEPS-IC and Form 5500
Kristin McCue
September 01, 2008
This paper compares data on employers’ health and pension offerings from the two
sources: publicly available administrative data from Form 5500 filings and survey data from the
Insurance Component of the Medical Expenditure Panel Survey (MEPS-IC). The basic findings
are that the 5500 filings cover too few health plans to be very useful as a substitute or
supplement to the MEPS-IC measure of whether or not employers offer health insurance. The
pension information in the 5500 filings is potentially more useful as a supplement to the MEPSIC
for research purposes where additional pension information would be useful in studying
employers’ decisions to offer health insurance.
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View Paper 18 Pages 382235 Bytes
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