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The Missing Link: Technology, Productivity, and Investment
The Missing Link: Technology, Productivity, and Investment
Working Paper Number CES-95-12
Abstract
This paper examines the relationship between productivity, investment, and age for over 14,000 plants in the U.S. manufacturing sector in the 1972-1988 period. Productivity patterns vary significantly due to plant heterogeneity. Productivity first increases and then decreases with respect to plant age, and size and industry are systematically correlated with productivity and productivity growth. However, there is virtually no observable relationship between investment and productivity or productivity growth. Overall, the results indicate that plant heterogeneity and fixed effects are more important determinants of observable productivity patterns than sunk costs or capital reallocation. Key Words: productivity, investment, technical change
Page Last Revised - October 8, 2021
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