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Capital Resalability, Productivity Dispersion, and Market Structure

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Author Info

  • Natarajan Balasubramanian

    (Florida International University)

  • Jagadeesh Sivadasan

    (Ross School of Business, University of Michigan)

Abstract

We propose an industry-level index of capital resalability-the share of used capital in aggregate industry capital expenditure-that relates (inversely) to sunkenness of investments. Using data from U.S. manufacturing, we then test the effect of capital resalability on industry productivity dispersion, mean productivity, and industry concentration. As predicted by standard models of industry equilibrium with heterogeneous firms, we find that increases in capital resalability are associated with a reduction in productivity dispersion, and an increase in the mean and median of the productivity distribution. Furthermore, we find that capital resalability is negatively correlated with industry concentration. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 91 (2009)
Issue (Month): 3 (August)
Pages: 547-557

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Handle: RePEc:tpr:restat:v:91:y:2009:i:3:p:547-557

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. G. Cardullo & M. Conti & G. Sulis, 2012. "Sunk Capital, Unions and the Hold-Up Problem: Theory and Evidence from Sectoral Data," Working Paper CRENoS 201226, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  2. Matthias Kehrig, 2011. "The Cyclicality of Productivity Dispersion," 2011 Meeting Papers 484, Society for Economic Dynamics.
  3. Alessandro Gavazza, 2011. "The Role of Trading Frictions in Real Asset Markets," American Economic Review, American Economic Association, vol. 101(4), pages 1106-43, June.
  4. Antonio Falato & Dalida Kadyrzhanova & Jae W. Sim, 2013. "Rising intangible capital, shrinking debt capacity, and the US corporate savings glut," Finance and Economics Discussion Series 2013-67, Board of Governors of the Federal Reserve System (U.S.).
  5. Tian, Can, 2011. "Technology choice and endogenous productivity dispersion over the business cycles," MPRA Paper 34480, University Library of Munich, Germany, revised 02 Nov 2011.
  6. Rene S├Âllner, 2010. "Product Diversification and Labor Productivity Dispersion in German Manufacturing Industries," Jena Economic Research Papers 2010-028, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  7. Can Tian, 2012. "Riskiness Choice and Endogenous Productivity Dispersion over the Business Cycle," PIER Working Paper Archive 12-025, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  8. Amitabh Chandra & Amy Finkelstein & Adam Sacarny & Chad Syverson, 2013. "Healthcare Exceptionalism? Productivity and Allocation in the U.S. Healthcare Sector," NBER Working Papers 19200, National Bureau of Economic Research, Inc.

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