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November, 2001
Mark Doms1 Board of Governors, Federal Reserve Ron Jarmin2 Center for E onomi !t"dies, #.!. Cens"s B"rea" r$armin@ es. ens" %nd !&a'n (limek Center for E onomi s !t"dies, #.!. Cens"s B"rea" sklimek@ es. ens"


This paper analyzes productivity growth in the U.S. retail trade sector. We do this by examining changes in productivity and other measures of firm performance at the micro-level. The primary contribution of this research is to extend a rich literature and tradition of analyzing productivity growth of establishments and firms in manufacturing to other significant portions of the economy. In particular, we examine the role of turnover, entry and exit. Also, we extend our analysis to see how these changes are correlated with information on capital spending and spending on information technology. While our results are still preliminary, the patterns we see in the data are consistent with anecdotal evidence that many areas in retail are seeing large sophisticated companies introducing new technologies and processes and displacing less sophisticated retailers. However, there is more that needs to be done before we can more fully describe this process.

%n) findings, o*inions or on l"sions e+*ressed in t&is *a*er are t&ose of t&e a"t&ors and do not ne essaril) refle t t&e vie's of t&e Board of Governors of t&e Federal Reserve. ,&is *a*er re*orts t&e res"lts of resear & and anal)sis "ndertaken b) Cens"s B"rea" staff. -t &as "ndergone a more limited revie' b) t&e Cens"s B"rea" t&an its offi ial *"bli ations. ,&is re*ort is released to inform interested *arties and to en o"rage dis "ssion.

DSTI/EAS/IND/SWP/AH(2001)16 Introduction The recent slowdown notwithstanding, the performance of the U.S. economy over the past decade has been impressive. The recent period of strong economic and productivity growth coincided with an investment boom, particularly in computers and other forms of information technology (IT). Many observers point to these as evidence of a new economy driven largely by improvements in, and greater utilization, of IT. Indeed there is evidence that this in case. Aggregate level studies (Jorgenson and Stiroh 2000; Oliner and Sichel 2000; Schreyer 2000), and micro level analyses (Brynjolfsson and Hitt, 1995; Dunne et. al 1999) suggest a link between IT and productivity. However, the evidence in support of a new economy link between IT and economic performance is not overwhelming. Industry level studies (Stiroh 1998) find no link and micro level studies are concentrated in the manufacturing sector or use small, select samples of firms. Progress in this area has been hampered by the lack of appropriate data. Many of the sectors where IT is used most intensively are where measurement by official economic statistics is the weakest (Bosworth and Triplett 2000; Haltiwanger and Jarmin 2000). As a result, the relationship between IT and firm performance in the trade and service sectors is poorly understood. Statistical agencies are keenly aware of the measurement challenges facing them and that changes underway in the economy are adding to these. The Census Bureau has taken the lead in trying to address the needs of data users arising from the new economy by initiating new measurement initiatives, adding questions to existing surveys and finding new ways to more fully utilize existing data resources (Atrostic, Gates and Jarmin 2001). In this paper, we take that latter path and use previously untapped micro level data collected by the Census Bureau to analyze firm performance in the retail trade sector focusing on the role of information technology (IT). We extend a rich literature analyzing establishment and firm performance with Census micro data for the manufacturing sector to other significant portions of the economy. 3 In analyzing firm performance in the retail trade sector, we face several hurdles. First, the quantity and quality of information available to measure firm or establishment productivity in the retail sector is much poorer than in manufacturing. In particular, measuring output is problematic and there is little information collected on inputs. We dont offer much in terms of solving these problems and follow the standard practice of measuring productivity with sales per employee. This is a simple measure and intuitively appealing for the retail sector. Calculating other measures of productivity, such as value added per worker or multi factor productivity, for the retail sector at the firm or establishment level is prohibitively difficult An additional hurdle in examining firm performance in the trade sector arises from the fact that the data we are using are collected in a variety of surveys using different statistical units. In manufacturing, the value of outputs and inputs for establishments is collected in a single survey, the Annual Survey of Manufacturers. Unfortunately, the variables needed to construct just one measure of firm performance, labor productivity, for the trade sector are scattered across different surveys with different sampling frames and units of observation. Below we discuss how we combined the various survey data. One of contributions of this paper is exploring how to analyze firm performance outside of the goods producing sectors using Census Bureau micro data.

Foster, .alti'anger and (ri/an 011123 and Bartlesman and Doms 024443 bot& dis "ss t&e "sef"lness of "sing mi ro data in "nderstanding a variet) of iss"es in l"ding aggregate *rod" tivit) gro't&.

DSTI/EAS/IND/SWP/AH(2001)16 Basic facts and hypotheses about the retail trade sector Retail trade accounts for a large and growing portion of U.S. economic activity. The upper panel of table 1 presents output by sector from BEAs Gross Product Originating Database--output corresponds to value added, so that the sum across all sectors equals GDP. The trade sectors (both retail and wholesale) share of output was about the same as that of manufacturing in 1999, about 16 percent. However, the share for the trade sector has grown significantly faster than manufacturings since 1992. Further, this growth has occurred for both the retail and wholesale sectors. The second panel in table 1 shows employment by industry. Trade sector employment was about 60 percent greater than manufacturing employment in 1999. As in output, the growth in employment has been greater in the trade sector than in manufacturing, especially in retail. Figure 1 and the third panel in table 1 compare a crude measure of labor productivity--output per employee (a better measure would be to use hours worked, but the qualitative results remain the same)across the sectors. Since 1992, productivity growth in the trade sectors and in manufacturing averaged a bit more than 4 percent per year, greater than the average for the entire economy. Given the great interest surrounding the rebound in aggregate productivity growth since 1995, it is interesting that the retail sectors productivity growth also picked up. This strong productivity performance, especially that observed in the trade sectors, was unexpected and is still not well understood. What is behind the improved productivity performance of the retail sector? One hypothesis is that relatively productive firms, such as Wal-Mart or Starbucks, open a large number of establishments, increasing the market share of these firms. Relatively inefficient firms (K-Mart and Brothers Coffee) are driven out of the market. One factor that may make Wal-Mart successful is their use of information technology. Not only does Wal-Mart make substantial investments in IT, Wal-Mart knows how to make these investments pay-off more so than other firms. In the case of Starbucks, other factors may be at work, such as a consistently produced product that appeals to a large set of consumers. Foster, Haltiwanger and Krizan (2001) decompose aggregate productivity growth in the retail sector using data from the Censuses of Retail Trade. They find that most productivity growth comes from the net entry of establishments. That is, low productivity establishments exit and are replaced by high productivity new entrants. Looking more carefully at the characteristics of these high productivity entrants, they find that entering plants owned by existing firms are the most productive. This finding is consistent with the WalMart type stories described above. It is unlikely that a single explanation for improved productivity growth applies across the entire retail sector. There is tremendous variation within both retail and wholesale trade in terms of activity. Table 1b presents the employment breakdowns by two-digit industry. Retail trade is especially diverse, covering eating and drinking places, car dealers, shoe stores, department stores, and a wide variety of other retail establishments. The performance of these industries, and the firms within them, varies considerably. The role of IT in this performance most likely varies as well. Data We use micro data from two Census Bureau programs since no single program collects data on all the variables we need. First, we use establishment level data from the 1992 and 1997 Censuses of Retail Trade. The Census of Retail Trade (CRT) files at CES contain information on the universe of retail establishments and are the source for the measures of labor productivity we use below. To construct measures of total capital and computer investment, we use the 1992 Asset and Expenditures Survey (AES).

DSTI/EAS/IND/SWP/AH(2001)16 For the manufacturing sector, it is possible to match production and investment data at the establishment level. This is not the case in retail, however. Detailed (by type of equipment) annual investment data are not available for retail establishments from any Census Bureau survey. In 1998, the Annual Capital Expenditure Survey (ACES) asked firms to break out capital expenditures by equipment type for their companies three primary industries. In addition, most capital expenditure items were taken off the 1997 version of the AES, which is now known as the Business Expenditure Survey (BES), so as not to duplicate inquiries in the ACES. For the reference year 1992, investment and expenditure data were collected for the retail sector via the AES. While performed as part of the 1992 Economic Census, the sampling frame for the retail portion of the AES was the one used, at the time, for the Monthly and Annual Retail Trade Surveys. As a result, the sampling units in the 1992 AES are substantially different from the establishment units used in the CRT. Differences in sampling units and methodology across the Census and the AES make merging the information from them difficult. Below we describe the methods we employed to create the matched research data set used in the analysis. First we describe our two primary datasets in more detail. Census of Retail Trade As part of the Economic Census carried out every 5 years, the Census Bureau collects data for the universe of retail establishments. In an effort to reduce reporting burden on smaller businesses, only establishments with a specified minimum number of paid employees (this number varies by industry, but is generally around 10) are canvassed. Administrative data are used for small employer and non-employer establishments that are not mailed Census forms. Primary data on payroll, employment, sales, location and industrial classification are obtained for all retail establishments (both the mail and non-mail segments). Additional information on merchandise lines and selected other items are collected from the mail segment. For the current analysis, we are interested only in the base information on sales, employment and so on. An establishment is a single physical location where business is conducted. The frame for the CRT, and other Economic Censuses, is the Standard Statistical Establishment List (SSEL). Since administrative data from the SSEL are used directly in the CRT and because the CRT and SSEL share a common structure its useful to briefly describe the SSEL. The SSEL has two principal components. First, the Census Bureau receives information on taxpaying businesses from the Internal Revenue Service (IRS). This information corresponds to legal tax paying entities and the unit corresponds with the Employer Identification Number (EIN). The majority of businesses, in and outside of retail, have only one location. In these cases, the EI administrative reporting unit the Census receives from the IRS and the establishment are the same thing. When a new single unit establishment EIN arrives on IRS files, Census assigns both a Census File Number(CFN) and a Permanent Plant Number (PPN). Both numbers are unique to a physical establishment. However, the CFN is intended to incorporate information about the ownership of the establishment and can change as the ownership or other legal aspects of the establishment change. The PPN remains the same as long as the establishment remains open in the same location, even if it changes hands. Second, the Census Bureau annually surveys multi-location companies inquiring about the location, employment and industrial classification of all their establishments. The Company Organization Survey (COS), the Economic Censuses and other surveys are used to maintain the list of mulit-unit (those owned by multi-location companies) establishments. Multi-unit establishments are also assigned CFNs and PPNs. Again, they are unique to the establishment and the CFN contains information about the ownership of the establishment. Unlike in the single unit case, where they all refer to the same thing, the EI administrative reporting unit, the firm and the establishment can be very different for multi-units. This means the numeric

DSTI/EAS/IND/SWP/AH(2001)16 identifiers: EIN, CFN and PPN all refer to different units. For multi-unit establishments, the CFN contains an ALPHA code which identifies the firm that owns the establishment. An ALPHA can own many EINs, each of which can have several PPNs and CFNs associated with them. This ID structure is mapped directly to establishments in the CRT. These IDs are how researchers at CES can link establishments, firms and firm segments across different surveys. In most cases, these links are between like units (e.g., PPN to PPN or ALPHA to ALPHA). This is not the case when linking the AES and the CRT as our discussion of the AES below shows. 1992 Asset and Expenditures Survey Data on total capital expenditures and computer investment for the retail sector in 1992 are available from the 1992 Asset and Expenditure Survey (AES), done as part of the 1992 Economic Census. As mentioned above, the sampling frame for the1992 AES was that for Annual and Monthly Retail Trade Surveys. These surveys use significantly different sampling units than the establishments used in the CRT. The 1992 AES, following the sampling methodology of the Annual Retail Trade Survey (ARTS) was comprised of a list sample and an area sample. We do not use any of the data from the area sample, so we wont discuss it here (see U.S. Census Bureau, 1996 for discussion on the area sample). The list sample has two sub-lists for different types of records, EI and ALPHA records. Large multi-location retailers identified from the 1989 COS make up the first (ALPHA) list. Their establishments (and their corresponding EINs) were removed from the SSEL before drawing the EI list sample. The remaining establishments and their corresponding EINs make up the EI list. Most of the units in the ALPHA list are large multi-unit retailers that were selected in to the ARTS and, thus, the AES with certainty. These units typically correspond to an entire large retail company, but some larger retailers can have more that one reporting unit where the units are separated by major kind of business, and still others may have kinds of business that are out of scope for the CRT (e.g., wholesale or manufacturing establishments). Smaller multi-unit and single unit retailers are contained in the EI sub-list. The ARTS chooses three rotating probability samples from this list and the AES uses two of the three. For all businesses in the EI list, the EIN is the sampling unit. Therefore, it is possible for a multi-unit EI list company (an ALPHA) with more than one EI to be represented in the AES more than once, but for distinct segments of the firm.


Matching the AES to the CRT It is not possible to obtain exact unit to unit matches between the AES and the CRT for all multiunit retailers. There is not an accurate mapping between the sampling units on the AES (identified numerically by AESID) and the establishments in the CRT that the AES sampling units are intended to represent. This is due to timing issues relating to drawing the ARTS/AES sample and when the CRT is done. In addition, the ARTS is voluntary and the Census Bureau grants companies a lot of latitude in how they report in order to obtain their participation. Matching the AES to the CRT is not too problematic for EI cases since the EI sampling unit in the AES is intended to cover all establishments (usually only one) operating under a given EIN. The ALPHA cases, which account for a large amount of retail activity, are more difficult. For matching purposes, the unit of analysis in these can be thought of as an ALPHA - kind of business combination. That is the sampling unit is intended to describe the activities of a company within a given industrial, geographic or other classification. We match at the ALPHA two digit SIC (kind of business) level. The 1992 AES contained 20,355 EI units and 2810 ALPHA units. The ALPHA units collapse to 2024 ALPHA two digit SIC combinations. We matched 15,498 of the 20,355 EI units to the CRT. These EIs corresponded to 32,731 establishments. We matched 1631 of the 2024 ALPHA two digit SIC units (and 2385 of the 2819 ALPHA units) to the CRT. These companies had 228,982 establishments in the 1992 CRT. The result is a matched dataset with 17,129 firms. Note that what we are calling a firm, does not always match the legal definition of many large enterprises. Results Our goal is to better understand the processes generating productivity growth and improved firm performance in the retail trade sector. The matched AES CRT dataset we constructed allows us to exploit cross sectional variation in the intensity of computer and total capital investment and in labor productivity growth to see if firms that invested heavily in 1992 enjoyed more productivity growth over the 1992 to 1997 period. In the retail sector, perhaps more so that other sectors, increases in sales and the number of establishments a firm operates are good signals of firm success. We examine these below as well. We employ both firm and plant level regressions. Our empirical framework is straightforward. Our preference would be to estimate production functions. However, the quality and quantity of the data available prevents us from doing so. The only input we observe is total employment. We can not measure the capital stock, only investment for one period. Further, sales is a crude measure of output and we do not have firm specific deflators, which are important in a sector with large quality differentials between firm operating inside well-defined industries. Thus, we do not estimate structural production function parameters and instead employ simple regressions with the hope describing the relationships of proxy measures in the data. This is also why we chose to examine different metrics of retail firm performance. We regress measures of retail firm performance on a measure of IT investment intensity as well as some controls as in the following

yj = f(ITj, Ij, sizej, INDj, wagej, j) where ITj is a measure of IT investment intensity, I j for firm j, is a measure of total investment intensity, size and IND are firm size and 2 digit SIC dummies, respectively and is an error term. Performance, y j, 7

DSTI/EAS/IND/SWP/AH(2001)16 is measured as the change between 1992 and 1997 and all right hand side variables are measured in 1992. Construction of the measures we use is described in more detail below. Descriptive Results: Sector Wide Tables 2 and 3 contain descriptive statistics for the "quasi-firm" units we constructed from the CRT. All establishments, in both the 1992 and 1997 CRTs, are represented. We list the number of firms in each year as well as the number of surviving, or continuing, firms by size class. The table shows that there is considerable turnover amongst retail firms, especially in the smaller size categories. Work by Foster, Haltiwanger and Krizan (2000) suggests that net entry of establishments drives most aggregate retail productivity growth over a similar time period. Indeed, there is considerable turnover in retail trade at both the establishment and firm levels. More than half of the firms in the 0 to 9 size class in 1992 exit before 1997. We do not decompose productivity growth as do Foster et. al., but our results suggest that changes to the retail sector caused by the net entry of establishments are dominated by large continuing firms. Results in Table 2 show that large continuing retailers contributed more than two thirds (26.494 of 34,980) of the increase in retail establishments between 1992 and 1997. Even more importantly perhaps, is the fact that large retailers contributed approximately 71% of the over 2.7 million net increase in retail employment over the 92 to 97 period! Large retailers add more retail establishments and jobs than do their smaller counterparts and are accounting for a larger portion of overall retail activity in the U.S. While, this result should seem obvious to most U.S. consumers, it is the opposite of the trends we have observed in the manufacturing sector, where large firms have reduced their employment share but have increased the productivity gap with small firms (Baldwin, Jarmin and Tang 2001). Table 3 gives some basic statistics for labor productivity (sales per worker) for 1992 and 1997 and gives the average firm level change in productivity. All productivity calculations are nominal, at this point. The results suggest that the productivity performance of large retailers is rather similar to all but the smallest firms. Matched AES CRT Sample Table 4 shows descriptive statistics for our matched sample of AES CRT data. The AES covers most large retailers with certainty in order to cover as much retail activity as possible, while holding the sample size and respondent burden to a minimum. As a result, even though our matched sample only covers 17,129 of the 1,071,737 retail firms in the 1992 CRT, it covers a sizeable portion of retail employment and sales. Productivity growth between 1992 and 1997 does not vary strikingly across the size distribution, as was the case for retail as a whole. Firms in the matched sample do tend, however, to be larger and more productive than the typical firm in the entire retail universe. The matched data allow us to look at the relationship between capital intensity and firm performance. The AES asks for total capital expenditures and for expenditures on selected types of equipment, such as computers. It does not include questions on stocks and we dont have time series data available at the firm level to construct capital stock measures. However, we are interested only in the cross sectional variation in capital and computer intensity. Previous work (Adams 19??) indicates that the patterns of cross sectional variation in investment and capital stocks are very similar. Therefore, we proxy total capital and computer intensities with, respectively, total and computer investment per dollar of sales. In table 5, we provided basic statistics on establishments, employment and productivity by capital and computer investment intensity categories. The table shows striking differences in the productivity 8

DSTI/EAS/IND/SWP/AH(2001)16 performance of firms according to capital and computer intensities. Also, establishment and employment growth for the matched AES CRT sample is concentrated entirely among firms with high capital and/or computer intensities. The productivity growth premium to being the high total and high computer intensity category is particularly interesting. Firm Level Regression Results To get a better handle on the role that investments in IT have in firm performance, we turn now to some simple regressions. We use two dependent variables in our analysis: labor productivity and establishment growth between 1992 and 1997. The construction of these measures means our analysis focuses on those firms that were active in both years. This could be a problem in light of the findings of Foster, Haltiwanger and Krizan (2000) who show that net entry accounts for a large portion of aggregate productivity growth in the retail sector. However, recall their results are based on the net entry of establishments. We are looking at firms here and, as table 2 shows, continuing firms (especially large ones) account for a substantial portion of net establishment entry. Before turning to the regressions, let us compare the characteristics of the firms in our matched subset, and used in our regressions, to the entire retail population. Our regressions are basically a cross sectional analyses of firms present in both 1992 and 1997 using 1992 characteristics as regressors. Thus, table 6 and 7 show some basic statistics on the number, size, number of establishments and productivity for all firms, and for our matched subset. Table 7 also lists statistics on capital and computer expenditures for the matched AES-CRT subset. Characteristics are given by 2 digit SIC in both tables. As expected, firms in the matched subset are much larger and more productive than the general population of retailers. Interestingly, there is no obvious correlation between the intensity of computer investment in a 2-digit industry and its productivity growth. Productivity Growth Results We are interested in seeing whether retail firms that use more capital, both IT and total, experience more productivity growth and are more likely to expand their operations through increased sales or by increasing the number of retail establishments. We use two measures of IT in the regressions. First, we group firms reporting non-zero investment into total and IT investment intensity (investment/sales) quartiles. In the AES, most respondents had either zero or missing responses to the question on IT spending and over a third had zero or missing total capital expenditures. Therefore, we also include dummies for zero or missing responses to both the total and IT investment variables. The other specification for IT investment is to enter IT as the share of total investment (IT/I). Table 8 contains results from regressions looking at the impact of total and IT investment intensities on labor productivity growth between 1992 and 1997 using both measures of IT. The regressions control for firm size, average (within firm) wage, and two digit SIC. The results show that productivity growth is lagging at very small retailers compared to their larger counterparts. Curiously, the results here suggest that higher wage firms enjoy less productivity growth. This result runs counter from what we would expect to find from studies using manufacturing micro data. This finding was robust to alternative specifications of the wage variable. At this point, we are not sure what to make of this result. Average wages differ considerably across differ types of retail businesses, even within two digit groups. Two digit industry controls are very crude and it could be that firms in industries, within 2 digit sectors, with lower average wages are those that are experiencing higher productivity growth. The results from model 1 show that the productivity growth premium for higher levels of total investment intensity is concentrated in the highest investment intensity quartile. The relationship between 9

DSTI/EAS/IND/SWP/AH(2001)16 computer investment intensities and productivity growth is monotonically increasing across the quartiles. This is true even when we control for both total and computer investment. Firms in the highest computer investment quartile experienced approximately 12% higher productivity growth that those in the lowest (but still positive) quartile. Those firms in both the highest total and computer intensity quartiles had 23% higher productivity growth that those in both of the lowest quartiles. Models 2 and 3 use the IT share of total investment measure. While the coefficient on the IT share variable is positive it is only marginally significant (at the 6% level) when a measure of total investment spending is included. However, we will see below that the IT share of investment (measured at the firm level) has a strong positive relationship with productivity growth measured at the establishment level. Establishment Growth Results Table 9 show results from similar regressions where the dependent variable is log change in the number of establishment at retail firms. This is good measure of overall firm performance in retail. Even with the Internet and catalogue shopping, most retail markets are local. A firms participation is a given market is indicated by the presence of one its establishments in that market. Firms that are successful expand into additional markets. The results in Table 9 show that only those firms in the highest computer and total investment intensity quartiles experience higher growth rates in the number of establishments. While the differences are not statistically significant, the relative magnitude of the computer and total investment coefficients in the third regression suggest that that computer investment is the more important driver here. Establishment Level Regression Results (to come) Conclusions The retail trade sector in the U.S. has experienced considerable growth over the last several years. In addition, the sector has enjoyed substantial productivity growth over the same period. The reasons for this impressive performance are not well understood and there is, generally, little focus on the sector by researchers. Part of this lack of attention can be attributed to a lack of good micro level data with which to study the retail sector. In this paper, we have brought different Census Bureau micro datasets together for the first time to examine potential explanations of productivity growth among firms in the retail sector. In particular we focus on the role played by computer investment. There is a sense in the popular imagination that large, technically sophisticated retailers are displacing smaller retailers. It is also widely thought that an important part of the business plan of these larger sophisticated retailers is a heavy reliance on information technology. Thus, we examine the relationship between IT intensity and labor productivity growth. Our results are still preliminary, so we hesitate drawing too much from them. However, the patterns we see in the data are consistent with anecdotal evidence that many areas in retail are seeing large sophisticated companies introducing new technologies and processes and displacing less sophisticated retailers.


DSTI/EAS/IND/SWP/AH(2001)16 However, there is more that needs to be done before we can more fully describe this process. We are currently in the process of incorporating data from the Annual Retail Trade Survey so that we can analyze the relationship between computer investment and both value added per employee (rather than sales per employee) and inventories. There is also, much more to do on seeing how measures of technical sophistication like computer investment interact with entry and exit patterns of both firms and establishments to yield improved performance in the retail sector. Finally, we want to expand our analysis to cover the entire Trade Sector.




Atrostic, Gates, Jarmin 2001 Bartelsman, Eric and Mark Doms, Understanding Productivity: Lessons from Longitudinal Microdata, Journal of Economic Literature, September 2000. Bosworth Triplett 2000 Byrnolfson and Hitt 1995 Dumas, Mark, Productivity Trends in Two Retail Trade Industries, 1987-1995, Monthly Labor Review, July 1997, 35-39. Dunne et. al. 1999 Foster, Lucia, John Haltiwanger and C.J. Krizan, Aggregate Productivity Growth: Lessons from Microeconomic Evidence, NBER Working Paper No. 6803, 1998 (also forthcoming in New Developments in Productivity Analysis, editors: Edward Dean, Michael Harper and Charles Hulten, University of Chicago Press) Foster, Lucia, John Haltiwanger and C.J. Krizan, The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade, working paper, November 2000. Haltiwanger and Jarmin 2000 Oliner and Sichel 2000 Schreyer (200).


DSTI/EAS/IND/SWP/AH(2001)16 Table 1: Basic Facts for Retail and Wholesale Trade Output by Industry (billions, $1992)
Total (GDP) Trade Retail Wholesale a!"#a$t"ri!% &o"r$e' ()*, Gross Prod"$t +, -!d"str, 1112 6,318.9 966.3 551.7 414.6 1,082.00 1115 6,642.3 1,010.5 578.0 432.5 1,131.4 1116 7,054.3 1,099.8 620.6 479.2 1,223.2 1117 7,400.5 1,147.4 646.8 500.6 1,289.1 1118 7,813.2 1,216.7 687.1 529.6 1,316.0 1119 8,318.4 1,307.3 740.5 566.8 1,379.6 1112 8,790.2 1,407.7 796.8 610.9 1,436.0 1111 9,299.2 1,499.7 856.4 643.3 1,500.8

Total .o!#ar/ )/0lo,ees (1000s) Trade Retail Wholesale a!"#a$t"ri!% &o"r$e' (1&

1112 108,591 25,352 19,355 5,997 18,106

1115 110,692 25,753 19,772 5,982 18,076

1116 114,135 26,664 20,501 6,163 18,323

1117 117,188 27,564 21,187 6,377 18,526

1118 119,597 28,078 21,596 6,482 18,496

1119 122,677 28,614 21,966 6,648 18,675

1112 125,845 29,095 22,295 6,800 18,806

1111 128,772 29,712 22,788 6,924 18,543

Crude Labor Productivity

Total (1000s 219923e/0lo,ee) Trade Retail Wholesale a!"#a$t"ri!%

1112 58.2 38.1 28.5 69.1 59.8 1112

1115 60.0 39.2 29.2 72.3 62.6 1115 3.1 2.9 2.6 4.6 4.7

1116 61.8 41.2 30.3 77.8 66.8 1116 3.0 5.1 3.6 7.5 6.7

1117 63.2 41.6 30.5 78.5 69.6 1117 2.2 0.9 0.8 0.9 4.2

1118 65.3 43.3 31.8 81.7 71.1 1118 3.4 4.1 4.2 4.1 2.2

1119 67.8 45.7 33.7 85.3 73.9 1119 3.8 5.4 6.0 4.4 3.8

1112 69.8 48.4 35.7 89.8 76.4 1112 3.0 5.9 6.0 5.4 3.4

1111 72.2 50.5 37.6 92.9 80.9 1111 3.4 4.3 5.2 3.4 6.0

Crude Labor Productivity Growth

Total (0er$e!t $ha!%e #ro/ 0rior 0eriod) Trade Retail Wholesale a!"#a$t"ri!%



Table 1b: Components of the Retail and Wholesale Trade Industries

:aid em*lo)ees 1119 1112 21,287,282 12,649,675 254,579 << 5,141,558 2,225,978 1,118,164 281,847 << 2,917,692 8,741,555 5,229,591 2,821,182 887,969 2,492,754 2,181,519 1,162,815 1,166,729 942,186 8,769,142 2,578,729 7,911,286 5,561,486 2,662,244 ; C&ange 17.7 26.9 6.9 19.8 <2.7 22.9 12.8 12.6 18.1 9.6

Retail ,rade B"ilding materials, &ard'are, garden s"**l) 72 and mobile &ome dealers 75 General Mer &andise stores 76 Food stores 77 %"tomotive dealers and gasoline servi e stations 78 %**arel and a essor) stores 79 .ome f"rnit"re, f"rnis&ings, and e="i*ment stores 72 Eating and drinking *la es 71 Mis ellaneo"s Retail >&olesale ,rade 74 D"rable goods 71 ?ond"rable goods



Chart 1: Labor Productivity ro!th by "#ctor




,otal ,rade Retail >&olesale Man"fa t"ring

7.4 P#rc#nt chan$#





4.4 1115 1116 1117 1118 1119 1112 1111


DSTI/EAS/IND/SWP/AH(2001)16 Table 2: Descriptive Statistics for the 1992 and 1997 Censuses of Retail Trade
@ of Em*lo)ment @ Af Firms, Contin"ing !i/e Class 1112 Firms @ of @ Af Firms, 1119 Establis&ments, 1112 @ of Cross Class Establis&ments, Contin"ers 1119 <7557 <6516 <5822 <527 2127 16446 5249 215,612 171,269 127,418 76,276 22,624 528,428 1,781,117

?et Entr)

>it&in Class Contin"ers

4B1 216,142 594,288 248,521 226,116 2424 <1589 14 < 11 159,258 91,817 166,159 179,541 1611 <177 24 < 61 26,767 75,495 12,596 111,677 7117 <1468 74 < 11 22,642 17,121 27,749 74,881 2111 <62 144 < 611 14,916 9,161 12,659 21,856 <1884 2977 744 C 1,272 1,685 2,491 212,274 <6429 28618 ,otal 1,491,959 722,151 1,422,277 1,728,217 7152 27257 !o"r eD %"t&orsE al "lations "sing 1112 and 1119 Cens"s of Retail ,rade, Center for E onomi !t"dies

Em*lo)ment !i/e Class

Em*lo)ment, 1112

?et C&ange in Em*lo)ment from ?et Entr) of Firms

<65116 21972 18829 18791 112928 <195564 127258

?et C&ange in Em*lo)ment ?et C&ange from at Firms Firms transitioning Em*lo)ment, 1119 Contin"ing into and o"t of t&e 'it&in !i/e si/e lass Class
11722 12914 52554 25266 18274 1161721 2211725 <59126 76881 11224 14164 96986 152721 621714 2,781,518 1,127,289 2,985,884 1,915,454 2,221,866 1,112,567 21,187,282

4<1 14 < 11 24 < 61 74 < 11 144 < 611 744 C ,otal

2,772,428 1,221,954 2,722,225 1,742,289 1,111,146 9,119,725 12,642,675


DSTI/EAS/IND/SWP/AH(2001)16 Table 3: Descriptive Statistics for Firms: All Retail - 1992 and 1997 Em*lo)ment !i/e Class ?"mber 1112 ?"mber 1119 %verage Fabor %verage Fabor %verage :rod" tivit), 1112 :rod" tivit), 1119 :rod" tivit) Gro't&

4B1 14 B 11 24 B 61 74 B 11 144 < 611 744 C Entrants E+iters

216,142 159,258 26,767 22,642 14,916 1,272 ?% 765,712

248,521 166,159 12,596 27,749 12,659 2,491 776,918

6.289 5.164 5.147 6.426 6.128 6.541 ?% 6.418

6.567 6.465 5.122 6.255 6.511 6.572 6.122 na

<4.479 4.412 4.114 4.155 4.172 4.144 ?% na

!o"r eD %"t&orsE al "lations "sing 1112 and 1119 Cens"s of Retail ,rade, Center for E onomi !t"dies Fabor *rod" tivit) is t&e log of !ales *er em*lo)ee, '&ere sales in meas"red in t&o"sands of nominal dollars.



Table 4: Descriptive Statistics for Firms: Matched Subset - 1992 and 1997

Em*lo)ment ?"mber !i/e Class 1112

?"mber of Contin"ers 1119 6,611 1,268 1,917 1,461 1,211 296 11,272

?"mber of Estabs, 1112 2,185 6,222 7,825 6,844 24,228 219,215 281,915

?"mber of Estabs, 1119

Em*lo)ment 1112

Em*lo)ment 1119

%verage Fabor %verage Fabor %verage :rod" tivit), 1112 :rod" tivit), :rod" tivit) 1119 Gro't& 6.755 G 6.858 6.779 G 6.819 6.812 G 6.282 6.122 G 7.496 6.211 G 7.124 6.892 G 6.961 6.891 6.947 6.216 7.158 7.114 6.911 <4.476 4.495 4.412 4.141 4.114 4.414

4B1 14 B 11 24 B 61 74 B 11 144 B 611 744 C ,otal

9,124 2,128 2,854 1,278 1,618 121 19,121

6,181 2,776 5,911 5,925 17,668 211,114 262,675

55,192 51,729 22,282 28,996 545,482 8,195,217 8,912,172

11,716 27,571 78,216 92,256 272,678 9,416,521 9,668,288


DSTI/EAS/IND/SWP/AH(2001)16 Source: Authors calculations using 92 and 97 Census of Retail Trade and 1992 Asset and Expenditures Survey, Center for Economic Studies. Labor productivity is the log of Sales per employee, where sales in measured in thousands of nominal dollars.


DSTI/EAS/IND/SWP/AH(2001)16 Table 5: Descriptive Statistics for Firms: Matched Subset - 1992 and 1997 -nvestment -ntensit) Categor) ?"mber ?"mber of ?"mber of Em*lo)ment Estabs, 1112 Estabs, 1119 1112 Em*lo)ment %verage Fabor %verage Fabor %verage 1119 :rod" tivit), :rod" tivit), :rod" tivit) 1112 1119 Gro't& 685,677 649,161 2,111,958 142,858 252,564 2,928,211 1,556,951 6.771 6.212 6.917 6.952 6.628 6.128 6.129 6.812 6.119 7.415 6.226 6.712 6.742 6.821 4.424 4.459 4.452 4.474 4.468 4.426 4.189

Hero or Missing ,otal -nvestment Fo' ,otal I Hero or missing -, Fo' ,otal I Fo' -, Fo' ,otalD .ig& -, .ig& ,otalI Hero or Missing -, .ig& ,otalI Fo' -, .ig& ,otalI .ig& -,

8,524 5,411 6,661 664 975 1,294 912

56,158 22,921 144,251 7,875 2,748 86,828 27,192

29,842 24,252 27,792 7,146 2,172 89,162 28,661

692,272 629,165 2,146,621 111,252 217,262 2,292,241 1,116,285

!o"r eD %"t&orsE al "lations "sing J12 and J19 Cens"s of Retail ,rade and 1112 %sset and E+*endit"res !"rve), Center for E onomi !t"dies




,'o Digit !-C 72 75 76 77 78 79 72 71

?"mber of Firms, 1112 77,111 14,286 129,797 162,278 85,424 91,814 551,622 282,527

%verage Em*lo)ment, 1112 12 245 25 16 12 1 24 1

%verage !"rvivor Em*lo)ment, 1119 12 257 21 12 17 2 17 2

%verage ?"mber of Establis&ments , 1112 1.272 5.591 1.617 1.619 2.542 1.522 1.542 1.558

%verage ?"mber of Establis&ments at s"rvivors, 1119 4.982 2.976 4.912 4.176 1.589 4.219 4.979 4.224

%verage Fabor :rod" tivit), 1112 6.717 6.225 6.622 7.416 6.182 6.722 5.642 6.542

%verage !"rvivor Fabor :rod" tivit), 1119 6.959 6.597 6.785 7.228 6.518 6.858 5.615 6.696

%verage C&ange in Fabor :rod" tivit) at !"rvivors 1.2; <9.5; <5.6; 5.2; <7.6; <1.6; <2.6; 1.9;


DSTI/EAS/IND/SWP/AH(2001)16 Table 7. Descriptive Statistics By Two-Digit Industry: Matched Subset ,'o Digit !-C 72 75 76 77 78 79 72 71 ?"mber of Firms, 1112 918 886 1,546 5,622 2,611 2,212 1,721 6,427 %verage Em*lo)ment, 1112 222 2,218 1,475 111 257 95 218 195 ?"mber of Firms, 1112 918 886 1,546 5,622 2,611 2,212 1,721 6,427 %verage Em*lo)ment, 1119 512 5,621 1,112 122 217 22 215 212 %verage ?"mber %verage ?"mber of of Establis&ments, Establis&ments, 1112 1119 1.281 1.287 21.628 22.166 21.916 24.551 2.191 2.826 25.212 11.478 9.454 8.918 22.581 29.485 12.116 12.822 Table 7, Continued. Com*"ter E+*endit"res, 1112 141,958 1,114,228 149,129 12,169 51,429 21,522 58,754 62,211 %verage Fabor :rod" tivit), 1112 6.228 6.551 6.799 7.621 6.556 6.989 5.682 6.715 %verage Fabor :rod" tivit), 1119 6.111 6.641 6.895 7.812 6.749 6.125 5.795 6.824 %verage C&ange in Fabor :rod" tivit) 5.5; <8.2; <4.442; 2.4; 1.4; 9.2; 4.6; 5.2;

,'o Digit !-C 72 75 76 77 78 79 72 71

Ca*ital E+*endit"res, 1112 1,484,645 16,881,617 2,177,122 558,952 516,885 241,821 1,566,949 698,111

%verage Ca*ital E+*endit"res as a ; of !ales, 1112 6.2; 2.4; 2.4; 1.7; 2.2; 1.2; 6.1; 2.8;

%verage Com*"ter E+*endit"res as a ; of !ales, 1112 4.6; 4.1; 4.4.8; 4.49; 4.2; 4.2; 1.1; 4.5;

Fabor *rod" tivit) is t&e log of !ales *er em*lo)ee, '&ere sales in meas"red in t&o"sands of nominal dollars.

Capital expenditure included new and used equipment and buildings but exclude land. Computer investment is for computer hardware and data processing equipment.


DSTI/EAS/IND/SWP/AH(2001)16 Table 8: Simple Labor Productivity Growth Regressions

Kariable Constant 4<1 14 <11 24 < 74 74 < 144 144 <744 744 C oeffi ient 1.512 <4.116 <4.472 <4.411 4.421 4.426 < <4.111 <4.412 <4.491 <4.417 < <4.111 <4.482 <4.461 < <4.471 <4.471 4.419 <4.172 <4.421 4.462 <4.452 4.494 <4.121 Model 1 standard error 4.496 4.425 4.427 4.427 4.429 4.428 < 4.449 4.421 4.424 4.424 < 4.429 4.428 4.427 < 4.424 4.422 4.429 4.451 4.422 4.418 4.411 4.419 4.425 oeffi ient 1.487 <4.115 <4.427 <4.425 4.441 4.449 < <4.412 4.458 Model 2 standard error 4.424 4.425 4.427 4.426 4.429 4.427 < 4.442 4.421 Model 5 oeffi ient 1.122 <4.127 <4.488 <4.425 4.441 4.449 < <4.412 4.478 <4.155 <4.144 <4.112

Em*lo)ment !i/e Class

log0'age3 -, !&are Ca*ital -nvestment -ntensit) L"artile 1st 2nd 5rd 6t& 1st 2nd 5rd 6t&

standard error 4.422 4.425 4.427 4.426 4.422 4.428 < 4.442 4.421 4.411 4.411 4.411

-, -nvestment -ntensit) L"artile

Hero Re*orted Ca*ital -nvestment Hero Re*orted -, -nvestment !-C 72D B"ilding Materials and .ard'are !tores !-C 75D General Mer &andise !tores !-C 76D Food !tores !-C 77D %"tomotive Dealers and Gas !tations !-C 78D %**arel and % essor) !tores !-C 79D .ome F"rnit"re and E="i*ment !tores !-C 72D Eating and Drinking :la es !-C 71D Mis ellaneo"s Retail ? G R2

4.441 <4.161 <4.424 4.459 <4.422 4.492 <4.114

4.451 4.458 4.427 4.411 4.425 4.421 4.429

4.414 <4.497 <4.472 4.459 <4.451 4.422 <4.158

4.451 4.458 4.427 4.411 4.426 4.421 4.429

14111 G 4.467

9195 G 4.464

9195 G 4.462


DSTI/EAS/IND/SWP/AH(2001)16 Table 9: Establishment Growth Regressions Model 1 oeffi ient standard error <4.528 4.461 4<1 4.487 4.418 14 <11 4.452 4.419 24 < 74 4.449 4.419 74 < 144 4.454 4.411 144 <744 <4.411 4.412 744 C < < 4.452 4.447 1st <4.471 4.415 2nd <4.429 4.415 5rd <4.471 4.415 6t& < < 1st 2nd 5rd 6t& <4.487 4.412 4.448 <4.451 <4.447 4.426 <4.422 4.444 4.462 < 4.412 4.421 4.417 4.411 4.415 4.412 4.417 < Model 2 standard error 4.474 4.418 4.419 4.419 4.411 4.412 < 4.447 Model 5 standard error 4.474 4.418 4.419 4.419 4.411 4.412 < 4.447 4.417 4.416 4.416 < 4.411 4.412 4.419 < 4.416 4.417 4.412 4.421 4.417 4.415 4.415 4.412 4.418 <

Kariable Constant

Em*lo)ment !i/e Class

log0'age3 Ca*ital -nvestment -ntensit) L"artile

oeffi ient <4.547 4.481 4.421 4.448 4.421 <4.412 < 4.452

-, -nvestment -ntensit) L"artile

< <4.481 <4.425 <4.487 < <4.424 4.448 <4.459 4.442 4.429 <4.421 4.444 4.472 <

< 4.419 4.419 4.419 < 4.415 4.412 4.421 4.417 4.411 4.415 4.412 4.417 <

Ca*ital -nvestment /ero or missing -, -nvestment /ero or missing !-C 72D B"ilding Materials and .ard'are !tores !-C 75D General Mer &andise !tores !-C 76D Food !tores !-C 77D %"tomotive Dealers and Gas !tations !-C 78D %**arel and % essor) !tores !-C 79D .ome F"rnit"re and E="i*ment !tores !-C 72D Eating and Drinking :la es !-C 71D Mis ellaneo"s Retail

oeffi ient <4.229 4.482 4.457 4.414 4.452 <4.414 < 4.451 <4.456 <4.412 <4.459 < <4.468 <4.495 <4.476 < <4.467 <4.472 4.449 <4.452 4.448 4.422 <4.422 4.441 4.475 <