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Localized Competition and the Aggregation of Plant-Level Increasing Returns: Blast Furnaces, 1929-1935

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  • Bertin, Amy L
  • Bresnahan, Timothy F
  • Raff, Daniel M G

Abstract

A recent empirical literature has shaken economists' confidence in the value of aggregate (industry-level) data to illuminate production relationships. But the statistical finding 'you can't aggregate,' however well documented, is not an economic explanation. Plant-level relationships do aggregate in Depression-era blast furnace operations despite the presence of very substantial interplant heterogeneity, the most common economic cause of nonaggregability. The economic explanation of this lies in poor short-run substitutability of one plant's output for another's. Substitutability determines the importance of composition effects in understanding aggregate time series, constrains the potential cleansing effects of recessions, and therefore influences industry evolution quite broadly. Copyright 1996 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 104 (1996)
Issue (Month): 2 (April)
Pages: 241-66

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Handle: RePEc:ucp:jpolec:v:104:y:1996:i:2:p:241-66

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Cited by:
  1. Maliranta, Mika, 2001. "Productivity Growth and Micro-level Restructuring. Finnish experiences during the turbulent decades," Discussion Papers 757, The Research Institute of the Finnish Economy.
  2. Uchida, Hirofumi & Miyakawa, Daisuke & Hosono, Kaoru & Ono, Arito & Uchino, Taisuke & Uesugi, Iichiro, 2013. "Natural Disaster and Natural Selection," Working Paper Series 25, Center for Interfirm Network, Institute of Economic Research, Hitotsubashi University.
  3. Chicu, Mark & Vickers, Chris & Ziebarth, Nicolas L., 2013. "Cementing the case for collusion under the National Recovery Administration," Explorations in Economic History, Elsevier, vol. 50(4), pages 487-507.
  4. Hiroshi Ohashi & Tsuyoshi Nakamura, 2005. "Technology Adoption, Learning by Doing, and Productivity: A Study from Steel Refining Furnaces," 2005 Meeting Papers 28, Society for Economic Dynamics.
  5. Yi-Chen Lin & Tai-Hsin Huang, 2012. "Creative destruction over the business cycle: a stochastic frontier analysis," Journal of Productivity Analysis, Springer, vol. 38(3), pages 285-302, December.
  6. Tsuyoshi Nakamura & Hiroshi Ohashi, 2005. "Technology Adoption, Learning by Doing, and Productivity: A Study of Steel Refining Furnaces," CIRJE F-Series CIRJE-F-368, CIRJE, Faculty of Economics, University of Tokyo.

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