Complementarities in Automobile Production
Johannes Van Biesebroeck ()
No 12131, NBER Working Papers from National Bureau of Economic Research, Inc
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).
JEL-codes: L23 L11 L62 M11 (search for similar items in EconPapers)
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Published as Johannes Van Biesebroeck, 2007. "Complementarities in automobile production," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1315-1345.
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