Discussion paper

DP17352 Structural Change Within versus Across Firms: Evidence from the United States

We document the role of intangible capital in manufacturing firms' substantial contribution to non-manufacturing employment growth from 1977-2019. Exploiting data on firms' "auxiliary" establishments, we develop a novel measure of proprietary in-house knowledge and show that it is associated with increased growth and industry switching. We rationalize this reallocation in a model where firms combine physical and knowledge inputs as complements, and where producing the latter in-house confers a sector-neutral productivity advantage facilitating within-firm structural transformation. Consistent with the model, manufacturing firms with auxiliary employment pivot towards services in response to a plausibly exogenous decline in their physical input prices.

£6.00
Citation

Ding, X, S Redding and P Schott (eds) (2022), “DP17352 Structural Change Within versus Across Firms: Evidence from the United States”, CEPR Press Discussion Paper No. 17352. https://new.cepr.org/publications/dp17352