Plant-level Productivity Research Articles

Manufacturing in a Natural Resource Based Economy: Evidence from Canadian Plants

This study investigates the effects of an oil boom on manufacturing plants performance. First, we derive several predictions using a model of heterogeneous firms. Second, we test these predictions on a plant level dataset using the Canadian Annual Survey of Manufacturers for 2000–2010. We exploit the time variation of the booming natural resource sector revenue in an oil-producing area in combination with the location of manufacturing plants to create an exogenous treatment variable. The outcome variables include plant level wages, employment, sales, and exports. We find that initial plant level productivity provides an important differentiation in average plants effects. Plants that are more productive become more likely to export in response to the oil boom, while less productive plants become less likely to export. Exporting firms become more likely to increase wages relative to non-exporting firms, but less likely to increase employment. While there is a great variety in the effect by sector, we do not observe that industry linkages with the resource industry drive plant performance.

Environmental quality-oriented air pollution emission permit allocation methods: A plant-level study

When implementing the emission permit system to control air pollution, current research mainly adopts top-down approaches to allocate emission quotas, lacking practicability at the plant level. In this study, two new plant-level permit allocation methods are proposed in consideration of the interference of environmental factors to help allocate emission quotas more effectively. These methods adjust the commonly-used emission standard permit allocation method by introducing the transmission of air pollutants between sources and receptor cities or by introducing the constraint of the environmental capacity. The study is conducted based on plant-level production data from 11,398 major emission units in the seven core cities of the Beijing-Tianjin-Hebei region, China. In 2017, these units emitted 139.7 thousand tons of primary PM2.5, 223.2 thousand tons of SO2, and 281.5 thousand tons of NOX, accounting for 24.8%–58.6% of the regional total emissions. The new methods could reduce emissions by up to 82.4% and reduce pollution concentrations by 12.3% maximumly. The slopes of the linear regressions between the issued and the allocated plant-level permit quotas are between 0.60 and 0.97, indicating the new methods perform well in reducing emissions at the plant level. However, as emission reduction is the ultimate outcome of multiple factors, these methods sometimes still cannot control pollution concentrations below the air quality standards due to the relatively loose environmental policy. Thus, it is recommended to tighten the emission standards to further reduce allocated permits. Overall, this work provides significant insight into improving emission allocation policies using plant-level data in real-world environmental governance in China.

Co-location of Formal and Informal Manufacturing and Firm’s Performance: Evidence from India

This study analyses the impact of co-location between formal and informal manufacturing sectors on plant-level productivity. We employ a unique data obtained by merging plant-level data from Annual Survey of Industries (ASI 2011–2012) and Survey of Unorganised Manufacturing and Repairing Enterprises provided by National Sample Survey Office (NSSO 67th round). We find that formal and informal manufacturing plants gain from localisation. Further, co-location with informal enterprises has a positive impact on productivity of formal sector plants; however, we observe insignificant impact of co-location on informal sector enterprises. Additionally, we find evidence that informal sector enterprises benefit from industrially diversified regions. JEL Codes: D24, R12, R3

How does structure matter? Comparison of canopy photosynthesis using one- and three-dimensional light models: a case study using greenhouse cucumber canopies

Abstract One-dimensional light models using the Beer–Lambert equation (BL) with the light extinction coefficient k are simple and robust tools for estimating light interception of homogeneous canopies. Functional–structural plant models (FSPMs) are powerful to capture light–plant interactions in heterogeneous canopies, but they are also more complex due to explicit descriptions of three-dimensional plant architecture and light models. For choosing an appropriate modelling approach, the trade-offs between simplicity and accuracy need to be considered when canopies with spatial heterogeneity are concerned. We compared two light modelling approaches, one following BL and another using ray tracing (RT), based on a framework of a dynamic FSPM of greenhouse cucumber. Resolutions of hourly step (HS) and daily step (DS) were applied to simulate light interception, leaf-level photosynthetic acclimation and plant-level dry matter production over growth periods of 2–5 weeks. Results showed that BL-HS was comparable to RT-HS in predicting shoot dry matter and photosynthetic parameters. The k used in the BL approach was simulated using an empirical relationship between k and leaf area index established with the assistance of RT, which showed variation up to 0.2 in k depending on canopy geometry under the same plant density. When a constant k value was used instead, a difference of 0.2 in k resulted in up to 27 % loss in accuracy for shoot dry matter. These results suggested that, with the assistance of RT in k estimation, the simple approach BL-HS provided efficient estimation for long-term processes.

Competition, Productivity and Product Mix: The Effect of China on Mexican Plants

We investigate the effect of the rise in product market competition, measured by the increase in Chinese exports to Mexico and the US, on the productivity of Mexican plants between 1994 and 2007. We use detailed panel data on Mexican manufacturers matched with trade data at the product level. Using quantity-based estimates of plant-level productivity, we identify the effect of increased foreign competition on Mexican plants. We find robust evidence of a heterogeneous effect, with foreign competition causing initially low-productivity plants to fall farther behind their peers. We focus on within-plant reallocation of output as an intermediate mechanism. All plants reallocate production towards existing higher revenue products increasing skewness of within-plant sales distribution, but along the extensive margin, both within and across plants, the selection mechanism in terms of product dropping and plant exit appears impaired. However, initially high-productivity plants experience a high degree of product churning in response to competition by introducing new products while their low-productivity peers maintain the status quo. Interesting differences also emerge in terms of the types of products being introduced with initially low-productivity plants substantially less likely to introduce products closer to their comparative advantage or with higher potential for productivity-enhancement, possibly contributing towards such plants’ loss in productivity.

Why is Pollution from U.S. Manufacturing Declining? The Roles of Trade, Regulation, Productivity, and Preferences

Between 1990 and 2008, emissions of the most common air pollutants from U.S. manufacturing fell by 60 percent, even as real U.S. manufacturing output grew substantially. This paper develops a quantitative model to explain how changes in trade, environmental regulation, productivity, and consumer preferences have contributed to these reductions in pollution emissions. We estimate the model's key parameters using administrative data on plant-level production and pollution decisions. We then combine these estimates with detailed historical data to provide a model-driven decomposition of the causes of the observed pollution changes. Finally, we compare the model-driven decomposition to a statistical decomposition. The model and data suggest three findings. First, the fall in pollution emissions is due to decreasing pollution per unit output within narrowly defined products, rather than to changes in the types of products produced or changes to the total quantity of manufacturing output. Second, the implicit pollution tax that rationalizes firm production and abatement behavior more than doubled between 1990 and 2008. Third, environmental regulation explains 75 percent or more of the observed reduction in pollution emissions from manufacturing.

제조업 사업체의 업력에 따른 생산성 증가율 분석

제조업 사업체의 업력에 따른 생산성 증가율 분석

Manufacturing in a Natural Resource Based Economy: Evidence from Canadian Plants

This study investigates the effects of an oil boom on firms' performance using data from the Canadian Annual Survey of Manufactures. We exploit the time variation of the booming natural resource sector activity in an oil-producing area with the location of manufacturing plants. We hypothesize that the effect of the booming sector on plants depends on their spatial proximity, which allows us to create an exogenous treatment variable. The outcome variables include plant-level wages, employment, sales, and exports. We find that the effect of the booming sector on the incidence of exporting varies greatly by plant-level productivity. More productive plants become more likely to export relative to less productive plants. They can do so by paying a higher wage, while employment grows less than plants that serve only the domestic market. We find that initial productivity and plants' ability to export provides an important differentiation in average plants effects. In particular, while there is a great variety in the effect by sector, a clear linkage with the resource industry is not observed.

Did Economic Reforms Affect Manufacturing Productivity in India?

India has witnessed a series of policy reforms since 1991, which aimed to increase productivity of the manufacturing sector. Did these reforms increase productivity in manufacturing plants? We address this question using rich data from the Annual Survey of Industries in India spanning three decades from 1983-84 to 2012-13. We focus on three reforms: delicensing, allowing foreign direct investments, and tariff reduction. We find no systematic or significant impact of the reforms on plant-level productivity in manufacturing. This result holds whether we look at the reforms individually using a difference-in-difference technique or simultaneously using fixed effects. Productivity is correlated with plant size, industry concentration, and misallocation, but we find that the reforms had no significant effect on any of these channels. This sheds light on why the economic reforms in India may have failed to impact productivity.

What Really Affects Plant-level Productivity?

This article investigates the plant-level characteristics that can affect plant-level productivity. Using Annual Survey of Industries (ASI) data from 1998–1999 to 2012–2013, we find that plant-level productivity is positively correlated with the number of products produced in the plant. It implies that the multi-product plants are relatively more productive than plants that produce only one product. We also find that plants are more productive if they enter the export market, and plant-level productivity is negatively associated with the ratio of production to non-production workers. This finding supports the fact that the plants with more skilled labour compared to unskilled labour are comparatively more productive. Additionally, we find that information and communication technology (ICT) has a significant and positive association with a plant’s productivity level.

Manufacturing in a Natural Resource Based Economy: Evidence from Canadian Plants

This study investigates the effects of an oil boom on manufacturing plants performance. First, we derive several predictions using a model of heterogeneous firms. Second, we test these predictions on a plant level dataset using the Canadian Annual Survey of Manufacturers for 2000-2010. We exploit the time variation of the booming natural resource sector revenue in an oil-producing area in combination with the location of manufacturing plants to create an exogenous treatment variable. The outcome variables include plant-level wages, employment, sales, and exports. We find that initial plant-level productivity provides an important differentiation in average plants effects. Plants that are more productive become more likely to export in response to the oil boom, while less productive plants become less likely to export. Exporting firms become more likely to increase wages relative to non-exporting firms, but less likely to increase employment. While there is a great variety in the effect by sector, we do not observe that industry linkages with the resource industry drive plant performance.

Do Flexibility and Chaining Really Help? An Empirical Analysis of Automotive Plant Networks

We study production networks of automotive assembly plants to shed new light on the impact of flexibility on plant productivity. We observe that the contemporary manufacturing networks of automotive assembly plants of three US companies (Chrysler, Ford and General Motors) have become less flexible over the years despite the reported benefits of flexibility. To understand this phenomenon, we utilize flexibility indices that have been developed in the modeling literature to measure flexibility but have never been tested in an empirical setting. We identify shortcomings in existing indices and propose a new index to measure network flexibility. Using our proposed index, we find that both extremes of flexibility (too much or too little) affect productivity negatively. Therefore, intermediate levels of flexibility are optimal because they balance the trade-off between better matching of supply and demand with excessive downtime due to model changeovers (changing production from one model to another), which were not accounted for in the modeling literature. Using plant-level production schedules, we find that productivity losses due to changeovers have a significant negative effect on manufacturing productivity, often making celebrated “chaining” approaches to network configuration uneconomical. Counterintuitively, firms can often benefit by reducing flexibility levels, depending on the current level of flexibility in the manufacturing network. For example, our estimates indicate that a firm with a highly flexible production network can gain up to 8.8% in productivity by rearranging its network. This can result in an average savings of 460,000 labor-hours in a plant with an average production of 200,000 vehicles per year. Using simulation, we show that well-established long-chain configurations cease to perform better than sparser configurations when changeover losses are accounted for, indicating that firms can be better-off by adopting a sparser structure than chaining to improve productivity.

Decentralized Environmental Regulations and Plant-Level Productivity

Using a unique plant-level dataset we examine total factor productivity (TFP) growth and its components, related to efficiency change and technical change. The data we use is from Sweden and for their pulp and paper industry, which is heavily regulated due to its historically large contribution to air and water pollution. Our paper contributes to the broader empirical literature on the Porter Hypothesis, which posits a positive relationship between environmental regulation and “green” TFP growth of firms. Our exercise is innovative as Sweden has a unique regulatory structure where the manufacturing plants have to comply with plant-specific regulatory standards stipulated at the national level, as well as decentralized local supervision and enforcement. Our key findings are: (1) prudential regulation limits expansion of plants with high initial pollution; (2) regulation, however, is not conducive to plants’ “green” technical change, which provides evidence against the recast version of the Porter Hypothesis; (3) decentralized command-and-control regulation is prone to regulatory bias, entailing politically motivated discriminatory treatment of plants with otherwise equal characteristics.

Decentralized Environmental Regulations and Plant-Level Productivity

Using a unique plant-level dataset we examine total factor productivity (TFP) growth and its components, related to efficiency change and technical change. The data we use is from Sweden and for their pulp and paper industry, which is heavily regulated due to its historically large contribution to air and water pollution. Our paper contributes to the broader empirical literature on the Porter Hypothesis, which posits a positive relationship between environmental regulation and “green” TFP growth of firms. Our exercise is innovative as Sweden has a unique regulatory structure where the manufacturing plants have to comply with plant-specific regulatory standards stipulated at the national level, as well as decentralized local supervision and enforcement. Our key findings are: (1) prudential regulation limits expansion of plants with high initial pollution; (2) regulation, however, is not conducive to plants’ “green” technical change, which provides evidence against the recast version of the Porter Hypothesis; (3) decentralized command-and-control regulation is prone to regulatory bias, entailing politically motivated discriminatory treatment of plants with otherwise equal characteristics.

Trade and labor reallocation with heterogeneous enforcement of labor regulations

This paper revisits the question of how trade affects labor market outcomes in a developing country setting. We explore the fact that plants face varying degrees of exposure to the enforcement of labor market regulations, and rely on Brazil's currency crisis in 1999 as an exogenous source of variation in access to foreign markets. Using administrative data on employers and their employees, and on the enforcement of labor regulations at the city level over Brazil's crisis period, we document that the way a currency shock affects employment depends on the stringency of de facto labor market regulations. In particular, we show for Brazil, a country with strict de jure labor regulation, that after a depreciation, plants facing stricter enforcement of the labor law increase employment by less than plants facing looser enforcement. These findings are consistent with the hypothesis that, in the context of strict de jure labor market regulations, increased enforcement limits the plant-level productivity gains associated with a more global market. Therefore, increasing the flexibility of de jure regulations may allow for broader access to the gains from trade.

Evidence for the Effects of Mergers on Market Power and Efficiency

Study of the impact of mergers and acquisitions (M&As) on productivity and market power has been complicated by the difficulty of separating these two effects. We use newly-developed techniques to separately estimate productivity and markups across a wide range of industries using detailed plant-level data. Employing a difference-in-differences framework, we find that M&As are associated with increases in average markups, but find little evidence for effects on plant-level productivity. We also examine whether M&As increase efficiency through reallocation of production to more efficient plants or through reductions in administrative operations, but again find little evidence for these channels, on average. The results are robust to a range of approaches to address the endogeneity of firms' merger decisions.

Environmental investment and firm performance: A network approach

This study examines the role of investment in environmental production practices for both environmental performance and energy efficiency over time. We employ a network DEA approach that links successive production technologies through intertemporal investment decisions with a period by period estimation. This allows us to estimate energy efficiency and environmental performance separately, as well as productivity change and its associated decompositions into efficiency change and technology change. Incorporating a network model also allows us to account for both short-term environmental management practices and long-term environmental investments in each of our productivity measures. We apply this framework to a panel of detailed plant-level production data for Swedish manufacturing firms covering the years 2002–2008.

Trade Reforms and Plant-Level Productivity Gains: Role of Tariff Reduction, Technological Spillovers and Variety Growth

How does trade liberalization impact productivity at the micro level in the economy? Using a panel data of Indian manufacturing plants for the period 1998-99 to 2007-08 this study examines the mechanisms through which trade impacts productivity growth at the production level in the economy. These mechanisms include trade induced pro-competitive effect, technological spillovers and import and export variety growth. We use two estimation techniques and find significant impact of these mechanisms in driving plant level productivity growth. Productivity gains arising from input channels are found to be greater than the output channels. The study also looks into the role of various plant level characteristics and state level institutional factors in influencing these micro level productivity gains.

Why is Pollution from U.S. Manufacturing Declining? The Roles of Trade, Regulation, Productivity, and Preferences

Between 1990 and 2008, emissions of the most common air pollutants from U.S. manufacturing fell by 60 percent, even as real U.S. manufacturing output grew substantially. This paper develops a quantitative model to explain how changes in trade, environmental regulation, productivity, and consumer preferences have contributed to these reductions in pollution emissions. We estimate the model's key parameters using administrative data on plant-level production and pollution decisions. We then combine these estimates with detailed historical data to provide a model-driven decomposition of the causes of the observed pollution changes. Finally, we compare the model-driven decomposition to a statistical decomposition. The model and data suggest three findings. First, the fall in pollution emissions is due to decreasing pollution per unit output within narrowly defined products, rather than to changes in the types of products produced or changes to the total quantity of manufacturing output. Second, the implicit pollution tax that rationalizes firm production and abatement behavior more than doubled between 1990 and 2008. Third, environmental regulation explains 75 percent or more of the observed reduction in pollution emissions from manufacturing.

Cluster Based Industrialization and its Effect on Firm Productivity in Pakistan

This paper examines the effect of externalities associated with agglomeration on firm level productivity in Pakistan. We begin our analysis by calculating six measures of agglomeration which give us the pattern of spatial concentration across the country. To calculate these six measures we use data at the country level and for Punjab between 1988-89 and 2005-06. The data is derived from the Census of Establishments for 1988-89, and the Census of Manufacturing Industries for the years 1995-96, 2000-01 and 2005-06. Our agglomeration measures show that although 59.5% of the industries in the country are highly agglomerated, the results are varied, with no one industry consistently emerging as a concentrated industry in either the country or in Punjab for the several years examined. Similarly, patterns of regional specialization tend to vary considerably over the length of time under examination with areas identified as specialized in the first round of data not ranking as most specialized in the next wave. Finally, the data shows that localization economies are typically stronger than urbanization economies in the Pakistani context, indicating that firms tend to benefit from intra industry externalities rather than inter industry externalities. Our analysis also considers development indicators which may be affecting the firm location decision. Specifically, we examine human capital development, crime, road density, and agricultural output. Overall, we find that human capital development is fairly low in the country, with large urban districts such as Karachi staying at the top of the ranking regardless of the year examined, and lower ranked districts failing to catch up. At the same time, crime in these urban districts remains high while road density is high in most of the large urban districts, with the exception of Karachi district, whose lower rank may be explained by its large size, and by considering that district includes less developed surrounding areas around Karachi city proper. Finally, districts in the agricultural heartland of the country, namely Multan, Rahim Yar Khan and Bahawalpur remain the highest in terms of agricultural produce, with Karachi and Karak ranked among the lowest. Having established the patterns of agglomeration and development across the country we next examine the impact of these location and industry concentration indexes on productivity in manufacturing firms through a plant level production function across all districts of Pakistan, while also identifying the impact of firm inputs such as capital and labor. Our regression specification includes controls for connectivity through a road density variable, human capital levels through an education index, and working environment through crime statistics. Our results indicate a strong role for agglomeration economies and the associated externalities in firm output over a long time horizon, and a significant role for development indicators like road density and human capital over a shorter time frame.