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Entry, Exit and Investment-Specific Technical Change, Second Version

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  • Roberto M. Samaniego

    ()
    (Department of Economics, George Washington University)

Abstract

Using European data, this paper finds that (1) industry entry and exit rates are positively related to industry rates of investment-specific technical change (ISTC); (2) the sensitivity of industry entry and exit rates to cross-country differences in entry costs depends on industry rates of ISTC. The paper constructs a general equilibrium model in which the rate of ISTC varies across industries and new investment-specific technologies can be introduced by entrants or by incumbents. In the calibrated model, equilibrium behavior is consistent with stylized facts (1) and (2), provided the cost of technology adoption is increasing in the rate of ISTC.

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 09-020.

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Length: 39 pages
Date of creation: 02 Apr 2008
Date of revision: 08 Dec 2008
Handle: RePEc:pen:papers:09-020

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Keywords: Entry; exit; turnover; investment-specific technical change; entry costs; vintage capital; embodied technical change; lumpy investment;

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References

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  1. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
  2. Simeon Djankov & Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "The Regulation Of Entry," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 1-37, February.
  3. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and measuring organization capital," Staff Report 291, Federal Reserve Bank of Minneapolis.
  4. Aubhik Khan & Julia K. Thomas, 2006. "Idiosyncratic Shocks and the Role of Nonconvexities in Plant and Aggregate Investment Dynamics," 2006 Meeting Papers 294, Society for Economic Dynamics.
  5. Roberto M Samaniego, 2004. "Does Employment Protection Inhibit Technical Diffusion?," Computing in Economics and Finance 2004 51, Society for Computational Economics.
  6. Jeremy Greenwood & Boyan Jovanovic, 2000. "Accounting for Growth," RCER Working Papers 475, University of Rochester - Center for Economic Research (RCER).
    • Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters, in: New Developments in Productivity Analysis, pages 179-224 National Bureau of Economic Research, Inc.
  7. Jeffrey R. Campbell, 1997. "Entry, Exit, Embodied Technology, and Business Cycles," NBER Working Papers 5955, National Bureau of Economic Research, Inc.
  8. Dennis C. Mueller & John E. Tilton, 1969. "Research and Development Costs as a Barrier to Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 2(4), pages 570-579, November.
  9. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  10. Mark E. Doms & Timothy Dunne, 1998. "Capital Adjustment Patterns in Manufacturing Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 409-429, April.
  11. Ngai, Liwa Rachel & Samaniego, Roberto, 2007. "On the Long run Determinants of Industry TFP Growth Rates," CEPR Discussion Papers 6408, C.E.P.R. Discussion Papers.
  12. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-81, June.
  13. Jeffrey R. Campbell, 1997. "Computational Appendix to Entry, Exit, Embodied Technology, and Business Cycles," Technical Appendices campbell98, Review of Economic Dynamics.
  14. Jovanovic, Boyan & Nyarko, Yaw, 1996. "Learning by Doing and the Choice of Technology," Econometrica, Econometric Society, vol. 64(6), pages 1299-1310, November.
  15. James Bessen, 2002. "Technology Adoption Costs and Productivity Growth: The Transition to Information Technology," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 443-469, April.
  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.
  17. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  18. Preston R. Fee & Hugo M. Mialon & Michael A. Williams, 2004. "What Is a Barrier to Entry?," American Economic Review, American Economic Association, vol. 94(2), pages 461-465, May.
  19. Geroski, Paul A, 1989. "Entry, Innovation and Productivity Growth," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 572-78, November.
  20. Nicola Brandt, 2004. "Business Dynamics in Europe," OECD Science, Technology and Industry Working Papers 2004/1, OECD Publishing.
  21. Boyan Jovanovic & Chung-Yi Tse, 2006. "Creative Destruction in Industries," NBER Working Papers 12520, National Bureau of Economic Research, Inc.
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