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Paper Session

Saturday, Jan. 4, 2020 2:30 PM - 4:30 PM (PDT)

Manchester Grand Hyatt, Mission Beach B
Hosted By: Society of Government Economists
  • Chair: Lucy Eldridge, U.S. Bureau of Labor Statistics

Measuring Cross-Country Differences in Misallocation

T. Kirk White
U.S. Census Bureau
Martin Rotemberg
New York University


We describe differences between the commonly used version of the U.S. Census of Manufactures available at the RDCs and what establishments themselves report. We find substantially more extreme values of productivity (both measured TFPQ and TFPR) in the originally reported data. Furthermore, there is substantially more dispersion of commonly used measures such as the standard deviation or the interquartile range. To capture covariance, we follow the methodology of Hsieh et al. (2009). Measured allocative efficiency is subsantially higher in the cleaned data than the raw data - 4x higher in 2002, 20x in 2007, and 80x in 2012. Many of the important editing strategies at the Census, including industry analysts' manual edits and edits using tax records, are infeasible in non-U.S. datasets. We reanalyze cross-country comparisons starting from unprocessed U.S. and Indian data and using common data cleaning strategies: a simple trimming-outliers approach and a new Bayesian approach for editing and imputation. Under both methods there is little evidence that allocative efficiency is significantly worse for formal firms in India than in the United States. If anything, we find the opposite.

Firm Dynamics and Local Economic Shocks: Evidence from the Shale Oil and Gas Boom

Ryan A. Decker
Federal Reserve Board
Meagan McCollum
University of Tulsa
Gregory B. Upton Jr.
Louisiana State University


Empirical evidence and models of firm dynamics ascribe an important job creation role to new businesses and a particular sensitivity of young firms to economic shocks. Studying the role of entrepreneurs and new businesses in the economy's response to economic shocks is difficult due to the complicated causal connections between economic growth and firm entry. The recent revolution in shale oil and gas extraction – which created rapid, large gains in economic activity in areas possessing certain geological characteristics – presents a unique opportunity to study the response of firms – both new and existing – to an expansion of economic conditions. Using a diff-in-diff research design, we show that establishment entry accounts for most of the employment growth in shale regions. New firms and new establishments of existing firms account for about a quarter and three quarters of the increased annual aggregate growth rates, respectively, relative to plausible counterfactuals; cumulatively, establishments that opened after the shale boom began account for three quarters of total net employment gains from 2007 to 2014, and new firms comprise the majority of the cumulative growth from new establishments. These results have important implications for theories of firm dynamics.

Knowledge Capital and U.S. State-Level Differences in Labor Productivity

Sabrina Wulff Pabilonia
U.S. Bureau of Labor Statistics
Susan Fleck
U.S. Bureau of Labor Statistics


Hanushek, Ruhose, and Woessmann used income measures to analyze the impact of knowledge capital on state-level economic development. Recently published experimental state-level labor productivity measures from the U.S. Bureau of Labor Statistics provide the opportunity to extend their analysis to labor productivity. We find that in 2017, 12 percent of the dispersion in labor productivity levels is attributable to variation in knowledge capital. We also find that over the post-Great Recession period (2009–2017), initial knowledge capital is positively correlated with productivity growth: increasing test scores by one standard deviation is associated with a 1.6-percentage-point-faster average annual productivity growth rate.
Cian Ruane
International Monetary Fund
J. Anthony Cookson
University of Colorado Boulder
Eric A. Hanushek
Stanford University
JEL Classifications
  • F0 - General
  • J0 - General