Data shows that plants in the US grow with age much faster than in Mexico and India, a divergence that could reduce manufacturing productivity by 25% relative to the US

In the US, the average 40 year old plant employs over seven times as many workers as the typical plant five years or younger. In contrast, surviving plants in India and Mexico exhibit much slower growth, roughly doubling in size over the same age range. The divergence in plant dynamics suggests lower investments by Indian and Mexican plants in process efficiency, quality, and in accessing markets at home and abroad. In simple GE models, we find that the difference in life cycle dynamics could lower aggregate manufacturing productivity on the order or 25% in India and Mexico relative to the US.


Chang-Tai Hsieh

Chicago Booth School of Business

Peter Klenow

Stanford University