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Technology Locks, Creative Destruction, and Non-Convergence in Productivity Levels

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Author Info
Douglas Dwyer (William M. Mercer, Inc.)
Abstract

Plant-level data from U.S. textile industries indicate (1) significant cross-sectional dispersion in plant-level productivity within narrowly defined industries, (2) that highly productive plants grow faster and are less likely to exit, (3) dispersion in productivity is larger in industries with more rapid productivity growth, (4) older plants are bigger, and (5) plant births and closures are common to all four-digit textile industries. This paper presents an extended vintage model to explain these facts. The model assumes that a plant incurs a fixed cost of adopting the current best practice and convex costs of adjusting its capital stock. The model provides alternative explanations for the phenomena of investment spikes and S-shaped diffusion. Finally, the model interprets the fact that entry and exit are positively correlated across industries as evidence that variation in plant turnover across industries is driven by variation in technology rather than variation in demand growth. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1998.0010
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 1 (1998)
Issue (Month): 2 (April)
Pages: 430-473
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Handle: RePEc:red:issued:v:1:y:1998:i:2:p:430-473

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Find related papers by JEL classification:
L6 - Industrial Organization - - Industry Studies: Manufacturing
O3 - Economic Development, Technological Change, and Growth - - Technological Change
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-37, March. [Downloadable!] (restricted)
    Other versions:
  2. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-65, December. [Downloadable!] (restricted)
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    Other versions:
  5. Atkenson, Andrew & Khan, Aubhik & Ohanian, Lee, 1996. "Are data on industry evolution and gross job turnover relevant for macroeconomics?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 44(1), pages 215-239, June. [Downloadable!] (restricted)
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  7. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Douglas W Dwyer, 1995. "Whittling Away At Productivity Dispersion," Working Papers 95-5, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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  10. Phoebus J Dhrymes, 1991. "The Structure Of Production Technology Productivity And Aggregation Effects," Working Papers 91-5, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  11. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Douglas W Dwyer, 1997. "Productivity Races II: The Issue of Capital Measurement," Working Papers 97-3, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  15. Mark E. Doms & Timothy Dunne, 1998. "Capital Adjustment Patterns in Manufacturing Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 409-429, April. [Downloadable!] (restricted)
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  16. Pakes, A. & Ericson, R., 1990. "Empirical Implications Of Alternative Models Of Firm Dynamics," Papers 594, Yale - Economic Growth Center.
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  17. Dhymes, P., 1991. "The Structure of production Technology: Productivity and Aggregation Effects," Discussion Papers 1991_07, Columbia University, Department of Economics.
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  19. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter. [Downloadable!] (restricted)
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  20. Abel, Andrew B & Eberly, Janice C, 1994. "A Unified Model of Investment under Uncertainty," American Economic Review, American Economic Association, vol. 84(5), pages 1369-84, December. [Downloadable!] (restricted)
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  21. Russell Cooper & John Haltiwanger & Laura Power, 1995. "Machine Replacement and the Business Cycle: Lumps and Bumps," NBER Working Papers 5260, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  22. Dwyer, Douglas W., 1997. "Are Fixed Effects Fixed?," Working Papers 97-35, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  23. Cooley, Thomas F. & Greenwood, Jeremy & Yorukoglu, Mehmet, 1997. "The replacement problem," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 457-499, December. [Downloadable!] (restricted)
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  24. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995-2), pages 1-54. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Boyan Jovanovic & Chung-Yi Tse, 2006. "Creative Destruction in Industries," NBER Working Papers 12520, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Jeremy Greenwood & Boyan Jovanovic, 2000. "Accounting for Growth," RCER Working Papers 475, University of Rochester - Center for Economic Research (RCER). [Downloadable!]
    Other versions:
  3. Douglas W Dwyer, 2001. "Plant-Level Productivity and the Market Value of a Firm," Working Papers 01-03, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  4. Mika Maliranta, 2005. "Foreign-owned Firms and Productivity-enhancing Restructuring in Finnish Manufacturing Industries," Discussion Papers 965, The Research Institute of the Finnish Economy. [Downloadable!]
  5. C.J. Krizan & John Haltiwanger & Lucia Foster, 2002. "The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade," Working Papers 02-18, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
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