The paper analyzes the dynamics of productivity in the U.S. telecommunications equipment industry over the period 1974–1987, focusing on the impact of technological change and deregulation. The authors estimate a production function for the industry and use it to analyze plant-level productivity changes. They develop a semiparametric estimation technique that accounts for the relationship between productivity, input demand, and firm survival. The results show that deregulation increased the rate of industry productivity growth, despite no increase in the average plant-level productivity growth rate. This was due to a reallocation of capital towards more productive establishments, which offset other negative impacts on aggregate productivity. The authors find that traditional estimation methods produce biased results, and their semiparametric approach provides more accurate estimates. The study highlights the importance of considering firm-specific efficiency differences and the dynamic nature of the industry. The results suggest that the increase in productivity growth after deregulation was primarily due to a reallocation of capital to more productive plants, rather than an improvement in the efficiency of variable factor allocation. The paper also discusses the challenges of estimating production functions in the presence of entry and exit, and the need for a dynamic model that accounts for firm-specific efficiency and the equilibrating forces of entry and exit. The authors conclude that a detailed micro-level analysis is necessary to understand the processes that translated regulatory and technological changes into aggregate productivity growth.The paper analyzes the dynamics of productivity in the U.S. telecommunications equipment industry over the period 1974–1987, focusing on the impact of technological change and deregulation. The authors estimate a production function for the industry and use it to analyze plant-level productivity changes. They develop a semiparametric estimation technique that accounts for the relationship between productivity, input demand, and firm survival. The results show that deregulation increased the rate of industry productivity growth, despite no increase in the average plant-level productivity growth rate. This was due to a reallocation of capital towards more productive establishments, which offset other negative impacts on aggregate productivity. The authors find that traditional estimation methods produce biased results, and their semiparametric approach provides more accurate estimates. The study highlights the importance of considering firm-specific efficiency differences and the dynamic nature of the industry. The results suggest that the increase in productivity growth after deregulation was primarily due to a reallocation of capital to more productive plants, rather than an improvement in the efficiency of variable factor allocation. The paper also discusses the challenges of estimating production functions in the presence of entry and exit, and the need for a dynamic model that accounts for firm-specific efficiency and the equilibrating forces of entry and exit. The authors conclude that a detailed micro-level analysis is necessary to understand the processes that translated regulatory and technological changes into aggregate productivity growth.