The Life Cycle of Plants in India and Mexico *

In the United States, the average 40-year-old plant employs more than seven times as many workers as the typical plant 5 years or younger. In contrast, surviving plants in India and Mexico exhibit much slower growth, roughly doubling in size over the same age range. The divergence in plant dynamics suggests lower investments by Indian and Mexican plants in process efficiency, quality, and in accessing markets at home and abroad. In simple general equilibrium models, we find that the difference in life cycle dynamics could lower aggregate manufacturing productivity on the order of 25 percent in India and Mexico relative to the United States.