Downsizing in US Manufacturing, 1967 to 1997

Using US Census of Manufacturing data covering the period from 1967 to 1997, I analyze factors affecting downsizing in manufacturing. The data show that average establishment size declined in manufacturing, from an average of 60.5 employees in 1967 to 46.5 in 1997. The econometric results indicate considerable support for the hypotheses that foreign competition puts pressure on enterprises to downsize and that falling profits lead to a reduction in establishment size. However, the findings reject the notions that unions are an effective impediment to downsizing and that faster information-technology capital formation leads to downsizing.