Studies of firms and industries.

• Position: Conference

Studies of Firms and Industries

About 40 economists met in Cambridge on July 11-12 for an NBER conference on Studies of Firms and Industries. Research Associates Timothy F. Bresnahan, Stanford University; R. Glenn Hubbard, Columbia University; and Ariel Pakes, Yale University, organized the following program:

Ricardo J. Caballero, Columbia University; and

Richard K. Lyons, NBER and Columbia University,

"The Role of External Economies in U.S.

Manufacturing" and "Internal versus External Economies

in European Industry" (This paper is described in

"International Seminar on Macroeconomics.")

Frank R. Lichtenberg, NBER and Columbia University;

and Donald Siegel, State University of New York at

Stony Brook, "The Effects of Leveraged Buyouts

on Productivity and Related Aspects of Firm

Behavior" (NBER Working Paper No. 3022)

Steven N. Kaplan, University of Chicago,

"Management Buyouts: Evidence on Post-Buyout Operating

Changes"

William P. Rogerson, Northwestern University,

"Profit Regulation of Defense Contractors and Prizes

for Innovation"

Anil Kashyap and David W. Wilcox, Federal Reserve

Board, "Production Smoothing at the General

Motors Corporation during the 1920s and 1930s"

Thomas J. Holmes, University of Wisconsin at

Madison; and James A. Schmitz, Jr., State University of

New York at Stony Brook, "A Theory of

Entrepreneurship and Its Applications to the Study of

Business Transfers"

Timothy F. Bresnahan, and Peter C. Reiss, NBER and

Stanford University, "How Much Does Entry Change

Competition?"

Tito Boeri, New York University, "Product Choice,

Growth of Incumbent Firms, Entry, and Exit"

Caballero and Lyons develop a method for joint estimation of internal returns to scale and external economies. They then estimate indexes of returns to scale for U.S. manufacturing industries at the two-digit level. Overall, they find that only three of the 20 industry categories show any evidence of internal increasing returns: primary metals, electrical machinery, and paper products. However, there is very strong evidence of external economies, defined as external to a given two-digit industry and internal to the United States. They estimate that if all manufacturing industries simultaneously raise their inputs by 10 percent, aggregate manufacturing production will rise by 13 percent, of which about 5 percent is caused by external economies. Thus, when an industry increases its inputs in isolation by 10 percent, its output rises by no more than 8 percent.

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