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Optimal Adoption of Complementary Technologies

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  • Dmitriy Stolyarov
  • Boyan Jovanovic

Abstract

When a production process requires two extremely complementary inputs, conventional wisdom holds that a firm would always upgrade them simultaneously. We show, however, that if upgrading each input involves a fixed cost, the firm may upgrade them at different dates, "asynchronously." This insight helps us understand why productivity rises with the age of a plant, why investment in structures is more spiked than equipment investment, and why plants have spare capacity. The bigger point of the paper is that complementarity does not necessarily imply comovement--not even for a single decision maker.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 90 (2000)
Issue (Month): 1 (March)
Pages: 15-29

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Handle: RePEc:aea:aecrev:v:90:y:2000:i:1:p:15-29

Note: DOI: 10.1257/aer.90.1.15
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References

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  1. Mehmet Yorukoglu, 1998. "The Information Technology Productivity Paradox," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 551-592, April.
  2. Jim Bessen, 1997. "Productivity Adjustments and Learning-by-Doing as Human Capital," Working Papers 97-17, Center for Economic Studies, U.S. Census Bureau.
  3. Fumio Hayashi & Tohru Inoue, 1990. "The Relation Between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," NBER Working Papers 3326, National Bureau of Economic Research, Inc.
  4. Michael Gort & Raford Boddy, 1967. "Vintage Effects and the Time Path of Investment in Production Relations," NBER Chapters, in: The Theory and Empirical Analysis of Production, pages 395-430 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Margherita Scarlato & Marisa Cenci, 2004. "Istituzioni e mercato del lavoro nel Mezzogiorno d'Italia: un'analisi dinamica," GE, Growth, Math methods 0402002, EconWPA.
  2. Johannes Van Biesebroeck, 2006. "Complementarities in Automobile Production," NBER Working Papers 12131, National Bureau of Economic Research, Inc.
  3. Fabrizio Patriarca, 2010. "Time-to-build obsolescence and the technological paradox," Working Papers 6, Doctoral School of Economics, Sapienza University of Rome, revised 2010.
  4. Mulder, Peter & de Groot, Henri L. F. & Hofkes, Marjan W., 2003. "Explaining slow diffusion of energy-saving technologies; a vintage model with returns to diversity and learning-by-using," Resource and Energy Economics, Elsevier, vol. 25(1), pages 105-126, February.
  5. Bronwyn HOWELL & Arthur GRIMES, 2010. "Productivity Questions for Public Sector Fast Fibre Network Financiers," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(78), pages 127-146, 2nd quart.
  6. Daniel Wilson, 2004. "Investment Behavior of U.S. Firms Over Heterogenous Capital Goods: A Snapshot," Working Papers 04-19, Center for Economic Studies, U.S. Census Bureau.
  7. Kounetas, Kostas & Tsekouras, Kostas, 2010. "Are the Energy Efficiency Technologies efficient?," Economic Modelling, Elsevier, vol. 27(1), pages 274-283, January.
  8. repec:dgr:uvatin:0000032 is not listed on IDEAS
  9. Katsuya Takii, 2005. "Limited Attention, Interaction and the Growth of a Firm," Macroeconomics 0506005, EconWPA.
  10. Maliranta, Mika, . "Micro Level Dynamics of Productivity Growth. An Empirical Analysis of the Great Leap in Finnish Manufacturing Productivity in 1975-2000," ETLA A, The Research Institute of the Finnish Economy, number 38.
  11. Seong-Hoon Lee & Michael Gort, 2001. "The Life Cycles of Industrial Plants," Working Papers 01-10, Center for Economic Studies, U.S. Census Bureau.
  12. Useche, Pilar & Barham, Bradford L. & Foltz, Jeremy D., 2005. "A Trait Specific Model of GM Crop Adoption among U.S. Corn Farmers in the Upper Midwest," 2005 Annual meeting, July 24-27, Providence, RI 19202, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  13. Parsons, Christopher A. & Van Wesep, Edward D., 2013. "The timing of pay," Journal of Financial Economics, Elsevier, vol. 109(2), pages 373-397.
  14. Eugenio Pinto, 2006. "Firm Dynamics with Infrequent Adjustment and Learning," Computing in Economics and Finance 2006 467, Society for Computational Economics.
  15. repec:dgr:uvatin:2009032 is not listed on IDEAS
  16. Philipp Köllinger & Christian Schade, 2006. "Endogenous Acceleration of Technological Change," Discussion Papers of DIW Berlin 562, DIW Berlin, German Institute for Economic Research.
  17. Bronwyn H. Hall, 2004. "Innovation and Diffusion," NBER Working Papers 10212, National Bureau of Economic Research, Inc.
  18. Carlaw, Kenneth I., 2005. "Optimal obsolescence," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 69(1), pages 21-45.
  19. Birte Pohl & Peter Mulder, 2013. "Explaining the Diffusion of Renewable Energy Technology in Developing Countries," GIGA Working Paper Series 217, GIGA German Institute of Global and Area Studies.

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