Impacts of industry mix, technological change, selection and plant entry/exit on regional productivity growth

In this paper we identify five sources of regional productivity growth: changes in industry mix; technological change by incumbent plants; selection, or changes in plant market shares; plant entry; and plant exit. These sources of productivity change are measured for US states over the period 1963 to 1992. The geography of productivity change is shown to be complex; the absolute and relative size of the components of change vary considerably between regions and over time. Contrary to simplistic accounts that view productivity improvement solely as the result of technological change, we reveal that in a number of states efficiency gains within incumbent plants are overwhelmed by other sources of productivity growth. In addition, we show that rates of plant entry and plant exit are significantly higher in the sunbelt states of the south and west of the US than in the snowbelt. Plant turnover is lower than average in the traditional manufacturing belt of the US. Plants in this region are more likely to be incumbents, and thus longer-lived, than elsewhere.