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Plant Exit, Vintage Capital and the Business Cycle

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  • Kjell G. Salvanes
  • Ragnar Tveteras

Abstract

Despite the large literature on plant exit behavior, little attention has been paid to the vintage capital theory as an alternative hypothesis to learning. Learning models predict that exit rates decrease with plant age and the vintage capital theory predicts that exit rates increase with the age of capital. We use a panel of Norwegian manufacturing plants and construct an index of capital age to distinguish between the effects on exit rates. The empirical results imply that there is both a learning effect and a vintage capital effect. We also find that exit rates depend on the business cycle, and increase in severe downturns. Copyright Blackwell Publishing Ltd. 2004.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 52 (2004)
Issue (Month): 2 (06)
Pages: 255-276

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Handle: RePEc:bla:jindec:v:52:y:2004:i:2:p:255-276

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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Cited by:
  1. TOKUI Joji & INUI Tomohiko & Young Gak KIM, 2008. "Embodied Technological Progress and the Productivity Slowdown in Japan," Discussion papers 08017, Research Institute of Economy, Trade and Industry (RIETI).
  2. Emami Namini, Julian & Facchini, Giovanni & López, Ricardo A., 2013. "Export growth and firm survival," Economics Letters, Elsevier, vol. 120(3), pages 481-486.
  3. yamamura, eiji, 2008. "Dynamics of social trust and human capital in the learning process: The case of the Japan garment cluster in the period 1968-2005," MPRA Paper 10251, University Library of Munich, Germany.
  4. Boyan Jovanovic & Chung-Yi Tse, 2010. "Entry and Exit Echoes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 514-536, July.
  5. Lopez, Ricardo A., 2006. "Imports of intermediate inputs and plant survival," Economics Letters, Elsevier, vol. 92(1), pages 58-62, July.
  6. Richard Harris & John Moffat, 2011. "Plant-level Determinants of Total Factor Productivity in Great Britain, 1997-2006," SERC Discussion Papers 0064, Spatial Economics Research Centre, LSE.
  7. Julian Emami Namini & Giovanni Facchini & Ricardo A. Lopez, 2011. "Export Growth and Factor Market Competition: Theory and Some Evidence," Tinbergen Institute Discussion Papers 11-013/2, Tinbergen Institute.
  8. Emami Namini, Julian & Facchini, Giovanni & Lopez, Ricardo, 2011. "Export growth and factor market competition: theory and evidence," CEPR Discussion Papers 8256, C.E.P.R. Discussion Papers.
  9. Alvarez, Roberto & Görg, Holger, 2005. "Multinationals and Plant Exit: Evidence from Chile," IZA Discussion Papers 1611, Institute for the Study of Labor (IZA).
  10. Rolf Golombek & Arvid Raknerud, 2012. "Exit dynamics of start-up firms. Does profit matter?," Discussion Papers 706, Research Department of Statistics Norway.
  11. Rolf Golombek & Arvid Raknerud, 2005. "Exit Dynamics with Adjustment Costs," Discussion Papers 442, Research Department of Statistics Norway.
  12. Fernandes, Ana M. & Paunov, Caroline, 2012. "The risks of innovation : are innovating firms less likely to die ?," Policy Research Working Paper Series 6103, The World Bank.

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