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The Aggregate Implications of Machine Replacement: Theory and Evidence

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  • Russell Cooper
  • John Haltiwanger

Abstract

This paper studies an economy in which producers must incur resource costs to replace depreciated machines. The process of costly replacement and depreciation creates endogenous fluctuations in productivity, employment and output of a single producer. We also explore the spillover effects of machine replacement by multiple, independent producers. The implications of our model are generally consistent with observed monthly output and productivity fluctuations in automobile plants and with monthly variations in employment and production in the manufacturing sector.

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File URL: http://www.nber.org/papers/w3552.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3552.

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Date of creation: Dec 1990
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Publication status: published as American Economic Review, Vol. 83, No. 3, pp. 360-382 (June 1993).
Handle: RePEc:nbr:nberwo:3552

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  1. Cooper, Russell W. & Haltiwanger, John Jr., 1992. "Macroeconomic implications of production bunching : Factor demand linkages," Journal of Monetary Economics, Elsevier, Elsevier, vol. 30(1), pages 107-127, October.
  2. Barsky, Robert B & Miron, Jeffrey A, 1989. "The Seasonal Cycle and the Business Cycle," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(3), pages 503-34, June.
  3. Feldstein, Martin S & Rothschild, Michael, 1974. "Towards an Economic Theory of Replacement Investment," Econometrica, Econometric Society, Econometric Society, vol. 42(3), pages 393-423, May.
  4. Beaulieu, J. Joseph & Miron, Jeffrey A., 1991. "The seasonal cycle in U.S. manufacturing," Economics Letters, Elsevier, vol. 37(2), pages 115-118, October.
  5. Shleifer, Andrei, 1986. "Implementation Cycles," Scholarly Articles 3451303, Harvard University Department of Economics.
  6. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1989. "Increasing Returns, Durables and Economic Fluctuations," NBER Working Papers 3014, National Bureau of Economic Research, Inc.
  7. John Haltiwanger & Russell Cooper, 1992. "The Aggregate Implications Of Machine Replacement: Theory And Evidence," Working Papers 92-12, Center for Economic Studies, U.S. Census Bureau.
  8. Bernanke, Ben S & Parkinson, Martin L, 1991. "Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 439-59, June.
  9. Mas-Colell, Andreu, 1977. "Indivisible commodities and general equilibrium theory," Journal of Economic Theory, Elsevier, vol. 16(2), pages 443-456, December.
  10. Ghysels, E., 1991. "Are Business Cycle Turning Points Uniformly Distributed Throughout the Year?," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 9135, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  11. Russell Cooper & John Haltiwanger, 1992. "Autos and the National Industrial Recovery Act: Evidence on Industry Complementarities," Papers, Boston University - Industry Studies Programme 0028, Boston University - Industry Studies Programme.
  12. Martin S. Eichenbaum, 1988. "Some Empirical Evidence on the Production Level and Production Cost Smoothing Models of Inventory Investment," NBER Working Papers 2523, National Bureau of Economic Research, Inc.
  13. Bertola, G. & Caballero, R.J., 1990. "Kinked Adjustment Costs And Aggregate Dynamics," Discussion Papers, Columbia University, Department of Economics 1990_20, Columbia University, Department of Economics.
  14. repec:fth:coluec:465 is not listed on IDEAS
  15. Nickell, Stephen, 1975. "A closer look at replacement investment," Journal of Economic Theory, Elsevier, vol. 10(1), pages 54-88, February.
  16. Oliver Jean Blanchard & Peter Diamond, 1990. "The Cyclical Behovior of the Gross Flows of U.S. Workers," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 85-156.
  17. Blanchard, Olivier J. & Melino, Angelo, 1986. "The cyclical behavior of prices and quantities: The case of the automobile market," Journal of Monetary Economics, Elsevier, Elsevier, vol. 17(3), pages 379-407, May.
  18. R. Anton Braun & Charles L. Evans, 1996. "Seasonal Solow residuals and Christmas: a case for labor hoarding and increasing returns," Working Papers 575, Federal Reserve Bank of Minneapolis.
  19. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  20. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 103(3), pages 441-63, August.
  21. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1345-70, November.
  22. Timothy F. Bresnahan & Valerie A. Ramey, 1992. "Output Fluctuations at the Plant Level," NBER Working Papers 4105, National Bureau of Economic Research, Inc.
  23. Stephen G. Cecchetti & Anil Kashyap & David Wilcox, 1995. "Why Firms Smooth Seasonals in a Boom," Working Papers, Ohio State University, Department of Economics 001, Ohio State University, Department of Economics.
  24. Satyajit Chatterjee & B. Ravikumar, 1991. "A neoclassical model of seasonal fluctuations," Working Papers 91-23, Federal Reserve Bank of Philadelphia.
  25. Rothschild, Michael, 1971. "On the Cost of Adjustment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 85(4), pages 605-22, November.
  26. Peter Klenow, 1998. "Learning Curves and the Cyclical Behavior of Manufacturing Industries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 531-550, April.
  27. Robert E. Hall, 1991. "Labor Demand, Labor Supply, and Employment Volatility," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 17-62 National Bureau of Economic Research, Inc.
  28. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
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