DP2463 Restructuring And Productivity Growth In UK Manufacturing

Author(s): Richard F Disney, Jonathan Haskel, Ylva Heden
Publication Date: May 2000
Keyword(s): Entry, Exit, Market Selection, Productivity, Restructuring, Total Factor Productivity
JEL(s): L11, L6, O47
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2463

We analyse productivity growth in UK manufacturing 1980-92 using the newly available ARD panel of establishments drawn from the Census of Production. We examine the relative importance of 'internal' restructuring (such as new technology and organizational change) and 'external' restructuring (the process by which less efficient establishments exit and more efficient establishments enter and increase market share). We find that (a) 'external restructuring' accounts for 50% of labour productivity growth and 90% of TFP growth over the period; (b) much of the external restructuring effect comes from multi-establishment firms closing down poorly-performing plants and opening high-performing new ones, and (c) external competition is an important determinant of internal restructuring.