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Econ Conceptual Question - Manufacturing Part 1 It is a well-established empirical fact that, on average, manufacturing plants that import raw materials tend to produce

Econ Conceptual Question - Manufacturing

Part 1

It is a well-established empirical fact that, on average, manufacturing plants that import raw materials tend to produce more output per dollar spent on raw materials than those that do not. In other words, suppose that we have access to a survey of manufacturing plants which includes:

(1) how much output they produced,

(2) whether they imported raw materials or not, and

(3) how many dollars they spent in total on raw materials.

One pattern that we often see in survey data like this is that even when two plants spend the exact same amount in total on raw materials, importers tend to produce more than non-importers.

Provide two reasons why we might see this pattern. For each reason, provide an argument for why you think this makes sense. I will assign your grade on the basis of whether your answer is correct and the detail of your justification.

Part 2

Now suppose I told you that plants that import raw materials and buy domestic raw materials tend to produce more output per dollar than those than those that only buy one or the other. Which of your two reasons would this evidence support? Why?

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