Entry, Exit, Embodied Technology, and Business Cycles

Review of Economic Dynamics, 1998, vol. 1, issue 2, 371-408

Abstract: This paper studies the entry and exit of U.S. manufacturing plants over the business cycle and compares the results with those from a vintage capital model augmented to reproduce observed features of the plant life cycle. Looking at the entry and exit of plants provides new evidence supporting the hypothesis that shocks to embodied technological change are a significant source of economic fluctuations. In the U.S. economy, the entry rate covaries positively with output and total factor productivity growth, and the exit rate leads all three of these. A vintage capital model in which all technological progress is embodied in new plants reproduces these patterns. In the model economy, a persistent improvement to embodied technology induces obsolete plants to cease production, causing exit to rise. Later, as entering plants embodying the new technology become operational, both output and productivity increase. (Copyright: Elsevier)

JEL-codes: E22 L16 (search for similar items in EconPapers)
Date: 1998
Note: A technical appendix is available under handle RePEc:red:append:campbell98
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Citations: View citations in EconPapers (220)

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Related works:
Working Paper: Entry, Exit, Embodied Technology, and Business Cycles (1997)
Working Paper: Computational Appendix to Entry, Exit, Embodied Technology, and Business Cycles (1997)
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DOI: 10.1006/redy.1998.0009

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