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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. Bresnahan, Timothy F & Ramey, Valerie A, 1994. "Output Fluctuations at the Plant Level," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(3), pages 593-624, August.
  2. Shleifer, Andrei, 1986. "Implementation Cycles," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(6), pages 1163-90, December.
  3. R. Anton Braun & Charles L. Evans, 1996. "Seasonal Solow residuals and Christmas: a case for labor hoarding and increasing returns," Working Papers, Federal Reserve Bank of Minneapolis 575, Federal Reserve Bank of Minneapolis.
  4. Russell Cooper & John Haltiwanger, 1992. "Autos and the National Industrial Recovery Act: Evidence on Industry Complementarities," NBER Working Papers 4100, National Bureau of Economic Research, Inc.
  5. Ghysels, E., 1991. "Are Business Cycle Turning Points Uniformly Distributed Throughout the Year?," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9135, Universite de Montreal, Departement de sciences economiques.
  6. J. Joseph Beaulieu & Jeffrey A. Miron, 1990. "The Seasonal Cycle in U.S. Manufacturing," NBER Working Papers 3450, National Bureau of Economic Research, Inc.
  7. Russell Cooper & John Haltiwanger, 1990. "Macroeconomic Implications of Production Bunching: Factor Demand Linkages," Papers, Boston University - Industry Studies Programme 0001, Boston University - Industry Studies Programme.
  8. Russell Cooper & John Haltiwanger, 1990. "The Aggregate Implications of Machine Replacement: Theory and Evidence," NBER Working Papers 3552, National Bureau of Economic Research, Inc.
  9. 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.
  10. 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.
  11. Chatterjee, Satyajit & Ravikumar, B., 1992. "A neoclassical model of seasonal fluctuations," Journal of Monetary Economics, Elsevier, Elsevier, vol. 29(1), pages 59-86, February.
  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. 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.
  14. Mas-Colell, Andreu, 1977. "Indivisible commodities and general equilibrium theory," Journal of Economic Theory, Elsevier, Elsevier, vol. 16(2), pages 443-456, December.
  15. 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.
  16. repec:fth:coluec:465 is not listed on IDEAS
  17. 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.
  18. 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.
  19. 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.
  20. 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.
  21. 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.
  22. Ben S. Bernanke & Martin L. Parkinson, 1990. "Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries," NBER Working Papers 3503, National Bureau of Economic Research, Inc.
  23. 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.
  24. 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.
  25. 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.
  26. Nickell, Stephen, 1975. "A closer look at replacement investment," Journal of Economic Theory, Elsevier, Elsevier, vol. 10(1), pages 54-88, February.
  27. 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.
  28. Rothschild, Michael, 1971. "On the Cost of Adjustment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 85(4), pages 605-22, November.
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