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The Aggregate Implications of Machine Replacement: Theory and Evidence

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Author Info
Russell Cooper
John Haltiwanger

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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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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: Jun 1993
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Handle: RePEc:nbr:nberwo:3552

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  1. Quantitative Macroeconomics and Real Business Cycles (QM&RBC)
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. Shleifer, Andrei, 1986. "Implementation Cycles," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1163-90, December. [Downloadable!] (restricted)
  2. Nickell, Stephen, 1975. "A closer look at replacement investment," Journal of Economic Theory, Elsevier, vol. 10(1), pages 54-88, February. [Downloadable!] (restricted)
  3. Rothschild, Michael, 1971. "On the Cost of Adjustment," The Quarterly Journal of Economics, MIT Press, vol. 85(4), pages 605-22, November. [Downloadable!] (restricted)
  4. Feldstein, Martin S & Rothschild, Michael, 1974. "Towards an Economic Theory of Replacement Investment," Econometrica, Econometric Society, vol. 42(3), pages 393-423, May. [Downloadable!] (restricted)
  5. Timothy F. Bresnahan & Valerie A. Ramey, 1992. "Output Fluctuations at the Plant Level," NBER Working Papers 4105, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Cooper, Russell W. & Haltiwanger, John Jr., 1992. "Macroeconomic implications of production bunching : Factor demand linkages," Journal of Monetary Economics, Elsevier, vol. 30(1), pages 107-127, October. [Downloadable!] (restricted)
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  7. Bertola, G. & Caballero, R.J., 1990. "Kinked Adjustment Costs And Aggregate Dynamics," Discussion Papers 1990_20, Columbia University, Department of Economics.
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  8. Mas-Colell, Andreu, 1977. "Indivisible commodities and general equilibrium theory," Journal of Economic Theory, Elsevier, vol. 16(2), pages 443-456, December. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
  10. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  11. Chatterjee, Satyajit & Ravikumar, B., 1992. "A neoclassical model of seasonal fluctuations," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 59-86, February. [Downloadable!] (restricted)
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  12. J. Joseph Beaulieu & Jeffrey A. Miron, 1990. "The Seasonal Cycle in U.S. Manufacturing," NBER Working Papers 3450, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Blanchard, Olivier J. & Melino, Angelo, 1986. "The cyclical behavior of prices and quantities: The case of the automobile market," Journal of Monetary Economics, Elsevier, vol. 17(3), pages 379-407, May. [Downloadable!] (restricted)
  14. Stephen G. Cecchetti & Anil Kashyap & David Wilcox, 1995. "Why Firms Smooth Seasonals in a Boom," Working Papers 001, Ohio State University, Department of Economics. [Downloadable!]
  15. 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(1990-2), pages 85-156. [Downloadable!]
  16. 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. [Downloadable!] (restricted)
  17. Robert B. Barsky & Jeffrey A. Miron, 1989. "The Seasonal Cycle and the Business Cycle," NBER Working Papers 2688, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. 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, vol. 99(3), pages 439-59, June. [Downloadable!] (restricted)
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  19. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August. [Downloadable!] (restricted)
  20. R. Anton Braun & Charles L. Evans, 1991. "Seasonal Solow residuals and Christmas: a case for labor hoarding and increasing returns," Working Paper Series, Macroeconomic Issues 91-20, Federal Reserve Bank of Chicago.
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  21. Eichenbaum, Martin, 1989. "Some Empirical Evidence on the Production Level and Production Cost Smoothing Models of Inventory Investment," American Economic Review, American Economic Association, vol. 79(4), pages 853-64, September. [Downloadable!] (restricted)
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  22. 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. [Downloadable!]
  23. Ghysels, E., 1991. "Are Business Cycle Turning Points Uniformly Distributed Throughout the Year?," Cahiers de recherche 9135, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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  24. 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. [Downloadable!]
  25. 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.
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