Manufacturing Proposal

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Measuring Geographic Differences in Technical Change in the US Manufacturing Sector Ethan Lewis Final, 26 March 2004

I. Introduction A large and growing literature examines the influence of advanced technologies on the relative wages and productivity of different workers (for example, Doms, Dunne and Troske (1997) and Autor, Katz and Krueger (1998)). These studies are motivated by indirect evidence that recent trends in technological change, such as the dissemination of information technology, have increased the relative demand for skilled workers and raised their relative wages and employment. Using microeconomic data on the use of different technologies by individual worker (the computer use supplements to the Current Population Survey) or by individual establishment (such as the Surveys of Manufacturing Technology), researchers generally find an association between technical change and increases in wage dispersion. There is some evidence, however, that the pace of technological advances has varied across regions of the US. Two key facts are that changes in relative skill ratios across different US cities are nearly uncorrelated with changes in relative wages, and that the use of computers on the job shows significant differences across local labor markets. Motivated by this evidence, the purpose of this project is to use the Surveys of Manufacturing Technology (1988, 1991 and 1993 – hereafter SMT) to develop a new geographic area series for release to the public on the use, plans to use, and reasons for using advanced manufacturing technologies, and to generate regionally representative statistical weights for future SMT micro data users interested in constructing their own regional data. As these are fairly large surveys (around 10,000 establishments were surveyed in each year) it will be feasible

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to report statistics on at least the major categories of advanced production technology (described below) by state and in large metropolitan areas without the risk of revealing confidential information. (See Appendix 2.) A further goal will be to create more refined cross-tabulations by plant characteristics such as 2-digit industry, plant size (which Dunne (1994) shows is an important determinant of technology use), whether the plant is a military contractor. If successful, these statistics could be of use in a wide variety of research applications. For example, having publicly available regionally stratified technology-use data would be useful to researchers or decision-makers interested in the effect that government regulations (minimum wage, environmental regulations, etc.) have on technology use and technical change. It might also be possible to use these statistics as an alternative means of asking what effect technical change has on outcomes of interest, such as employment or wages. My own interest – and a secondary goal of this project – will be to try to assess how the characteristics of the local work force affect any observed geographic differences in the use and implementation of advanced manufacturing production technologies. This is motivated by evidence suggesting that technology responds to work force changes in a way that mitigates the impact of supply on wages (Lewis (2002)). Using the SMT micro data, this question will be evaluated by examining the impact of technology choice in a standard production function setup and comparing specifications that treat technological choice as exogenous versus others that treat the choice as driven in part by the relative availability of high skilled labor in the local labor market. Manufacturers’ reports of the benefits (for example, improve product quality) and costs (for example, associated costs of training workers) of the technology – which are asked differently in each SMT – will be assessed as possible alternative explanations or channels through which the skills of the local work force operate to effect technological change.

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There are two issues...
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