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Downsizing and Productivity Growth: Myth or Reality?

Martin Neil Baily, Eric Bartelsman () and John Haltiwanger

No 4741, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The conventional wisdom is that the rising productivity in the U.S. manufacturing sector in the 1980s has been driven by the apparently pervasive downsizing over this period. Aggregate evidence clearly shows falling employment accompanying the rise in productivity. In this paper, we examine the microeconomic evidence using the plant level data from the Longitudinal Research Database (LRD). In contrast to the conventional wisdom, we find that plants that increased employment as well as productivity contribute almost as much to overall productivity growth in the 1980s as the plants that increased productivity at the expense of employment. Further, there are striking differences by sector (defined by industry, size, region, wages, and ownership type) in the allocation of plants in terms of whether they upsize or downsize and whether they increase or decrease productivity. Nevertheless, in spite of the striking differences across sectors defined in a variety of ways, most of the variance of productivity and employment growth is accounted for by idiosyncratic factors.

JEL-codes: E23 E24 (search for similar items in EconPapers)
Date: 1994-05
Note: EFG PR
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Published as Small Business Economics, Vol. 8, no. 4 (August 1996): pp. 259-278.

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Journal Article: Downsizing and Productivity Growth: Myth or Reality? (1996)
Working Paper: Downsizing and Productivity Growth: Myth or Reality? (1994) Downloads
Working Paper: Downsizing and productivity growth: myth or reality? (1994)
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