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Industry Evolution and Transition: A Neoclassical Benchmark

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  • Andrew Atkeson
  • Patrick Kehoe

Abstract

Recently, a large number of countries have undertaken major reforms that have led to a large increase in the number of new enterprises. After these reforms, however, it has taken a number of years before output and productivity have begun to grow. The thesis of this paper is that the process of starting new enterprises is turbulent and time-consuming and as a result, it takes time before the benefits of reform show up in increases in measured output and productivity. To establish a neoclassical benchmark for reforming economies, we ask what the path of transition looks like in a reforming economy for which the process governing the growth of new enterprises looks like it does in the U.S., a well-functioning market economy. We find that it takes 5-7 years until measured output and productivity begin to grow rapidly following reform. This finding suggests that, even if all other aspects of the economy are perfect, the transition following economy-wide reforms should take a substantial amount of time.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6005.

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Date of creation: Apr 1997
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Handle: RePEc:nbr:nberwo:6005

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  1. Nelson, Richard R & Winter, Sidney G, 1982. "The Schumpeterian Tradeoff Revisited," American Economic Review, American Economic Association, American Economic Association, vol. 72(1), pages 114-32, March.
  2. Steve J. Davis & John Haltiwanger, 1991. "Gross job creation, gross job destruction and employment reallocation," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago 91-5, Federal Reserve Bank of Chicago.
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  4. Castanheira, Micael & Roland, Gerard, 2000. "The Optimal Speed of Transition: A General Equilibrium Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 219-39, February.
  5. Andrew Atkeson & Patrick J. Kehoe, 1993. "Social Insurance and Transition," NBER Working Papers 4411, National Bureau of Economic Research, Inc.
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  8. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, Econometric Society, vol. 50(3), pages 649-70, May.
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  11. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(2), pages 298-321, April.
  12. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(4), pages 671-98, November.
  13. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
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Cited by:
  1. Phelan, Christopher & Trejos, Alberto, 2000. "The aggregate effects of sectoral reallocations," Journal of Monetary Economics, Elsevier, Elsevier, vol. 45(2), pages 249-268, April.
  2. Vivek Dehejia & Douglas Dwyer, 2004. "Output and unemployment dynamics in transition," Journal of Economic Policy Reform, Taylor & Francis Journals, Taylor & Francis Journals, vol. 7(2), pages 69-81.
  3. Boyan Jovanovic & Peter L. Rousseau, 2000. "Vintage organization capital," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Apr.
  4. Bart Hobijn & Boyan Jovanovic, 2001. "The Information-Technology Revolution and the Stock Market: Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 91(5), pages 1203-1220, December.
  5. Pavel Kadochnikov, 2006. "An Analysis of Import Substitution in Russia after the 1998 Crisis," Research Paper Series, Gaidar Institute for Economic Policy, Gaidar Institute for Economic Policy, issue 95, pages 148.
  6. Rodolfo E. Manuelli, 2000. "Technological Change, the Labor Market and the Stock Market," NBER Working Papers 8022, National Bureau of Economic Research, Inc.
  7. Philip Auerswald, 2008. "Entrepreneurship in the Theory of the Firm," Small Business Economics, Springer, Springer, vol. 30(2), pages 111-126, February.
  8. Bronwyn HOWELL & Arthur GRIMES, 2010. "Productivity Questions for Public Sector Fast Fibre Network Financiers," Communications & Strategies, IDATE, Com&Strat dept., IDATE, Com&Strat dept., vol. 1(78), pages 127-146, 2nd quart.
  9. Boyan Jovanovic & Peter L. Rousseau, 2000. "Technology and the Stock Market: 1885-1998," Vanderbilt University Department of Economics Working Papers 0042, Vanderbilt University Department of Economics.
  10. John D. Stiver, 2003. "Technology Creation, Diffusion, and Growth Cycles," Working papers, University of Connecticut, Department of Economics 2003-35, University of Connecticut, Department of Economics.
  11. Bouev Maxim & Matveenko Vladimir & Vostroknutova Ekaterina, 1998. "Transformational Decline and Preconditions of Growth in Russia," EERC Working Paper Series 98-03e, EERC Research Network, Russia and CIS.
  12. Recanatini, Francesca & Wallsten, Scott J. & Lixin Colin Xu, 2000. "Surveying surveys and questioning questions - learning from World Bank experience," Policy Research Working Paper Series 2307, The World Bank.

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