The Survival of Industrial Plants

25 Pages Posted: 5 May 2003

See all articles by Michael Gort

Michael Gort

SUNY at Buffalo, College of Arts & Sciences, Department of Economics; National Bureau of Economic Research (NBER)

J. Bradford Jensen

Georgetown University - McDonough School of Business; Peterson Institute for International Economics

Seong-Hoon Lee

State University of New York at Buffalo

Date Written: August 7, 2002

Abstract

The study seeks to explain the attrition rate of new manufacturing plants in the United States in terms of three vectors of variables. The first explains how survival of the fittest proceeds through learning by firms (plants) about their own relative efficiency. The second explains how efficiency systematically changes over time and what augments or diminishes it. The third captures the opportunity cost of resources employed in a plant. The model is tested using maximum-likelihood probit analysis with very large samples for successive census years in the 1967-97 period. One sample consists of an unbalanced panel of about three-fourths of a million plants of single and multi-unit firms, or alternatively of about 300,000 plants if only the most reliable data are considered. The second is restricted to the plants of multi-unit firms in the same time span and consists of an unbalanced panel of more than 100,000 plants. The empirical analysis strongly confirms the predictions of the model.

Keywords: Plant Survival, Efficiency, Learning-by-doing, Technical Change

JEL Classification: O30, L20

Suggested Citation

Gort, Michael and Jensen, J. Bradford and Lee, Seong-Hoon, The Survival of Industrial Plants (August 7, 2002). Available at SSRN: https://ssrn.com/abstract=388121 or http://dx.doi.org/10.2139/ssrn.388121

Michael Gort

SUNY at Buffalo, College of Arts & Sciences, Department of Economics ( email )

Buffalo, NY 14260
United States
716-645-2121 x 42 (Phone)
716-645-2127 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

J. Bradford Jensen

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Seong-Hoon Lee (Contact Author)

State University of New York at Buffalo ( email )

12 Capen Hall
Buffalo, NY 14260
United States

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