Structural Change in Finnish Manufacturing: The Theory of the Aggregation of Production Functions and an Empirical Analysis with a Plant-Level Panel

Abstract In this paper, structural change in the Finnish manufacturing industries is studied using the theory of the aggregation of production functions and longitudinal plant-level data for the period from 1980 to 2005. To characterise the nature of structural change in 12 industries, we examine the invariance of aggregate production functions over time. Aggregate production functions need not be estimated because, according to the theory of the aggregation of production functions, the invariance can be analysed by investigating the stability of capacity density functions, which describe the distribution of value added in these industries. Even though the shapes of aggregate production fun…