In the United States, the average 40-year-old plant employs more than
seven times as many workers as the typical plant 5 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
general equilibrium models, we find that the difference in life cycle dynamics
could lower aggregate manufacturing productivity on the order of 25 percent in
India and Mexico relative to the United States.
