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Multi-Product Firms and Product Switching

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  • Andrew Bernard
  • Stephen Redding
  • Peter Schott

Abstract

This paper examines the frequency, pervasiveness and determinants of product switching by U.S. manufacturing firms. We find that one-half of firms alter their mix of five-digit SIC products every five years, that product switching is correlated with both firm- and firm-product attributes, and that product adding and dropping induce large changes in firm scope. The behavior we observe is consistent with a natural generalization of existing theories of industry dynamics that incorporates endogenous product selection within firms. Our findings suggest that product switching contributes to a reallocation of resources within firms towards their most efficient use.

Suggested Citation

  • Andrew Bernard & Stephen Redding & Peter Schott, 2008. "Multi-Product Firms and Product Switching," Working Papers 08-24, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:08-24
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    References listed on IDEAS

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    More about this item

    Keywords

    Heterogeneous firms; Product differentiation; Product market entry and exit;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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