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.
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Copy CitationXiang Ding, Teresa C. Fort, Stephen J. Redding, and Peter K. Schott, "Structural Change Within versus Across Firms: Evidence from the United States," NBER Working Paper 30127 (2022), https://doi.org/10.3386/w30127.
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