Production functions and plant size in U.S. manufacturing industries: An empirical study



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Texas Tech University


Recently, economic analysis based on empirical evidence from estimates of production functions pertaining to the U.S. manufacturing sector has gained considerable momentum. Research in this area has passed through two main stages of development. The first began with the publication of the pioneering work by Cobb and Douglas in 1928 and ended in 1961. During this period, estimates of production functions in U.S. manufacturing industries were of the following three types: (1) for manufacturing as a whole fitted to time-series data; (2) for manufacturing as a whole fitted to cross-section data for the individual industries for the same year; and (3) for manufacturing as a whole fitted to data across the states (the individual state being the unit of observation) for the same year. During this period a limited number of investigations was conducted within this framework of empirical research. This is attributed to the lack of sufficiently disaggregated data for value added, labor and capital inputs. Data for estimation purposes was not available for individual establishments in the manufacturing sector but was aggregated by industry.



Production, Industrial productivity