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Plant Exit, Vintage Capital and the Business Cycle

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  • Kjell G. Salvanes
  • Ragnar Tveteras

Abstract

Despite the large literature on plant exit behavior, little attention has been paid to the vintage capital theory as an alternative hypothesis to learning. Learning models predict that exit rates decrease with plant age and the vintage capital theory predicts that exit rates increase with the age of capital. We use a panel of Norwegian manufacturing plants and construct an index of capital age to distinguish between the effects on exit rates. The empirical results imply that there is both a learning effect and a vintage capital effect. We also find that exit rates depend on the business cycle, and increase in severe downturns. Copyright Blackwell Publishing Ltd. 2004.

Suggested Citation

  • Kjell G. Salvanes & Ragnar Tveteras, 2004. "Plant Exit, Vintage Capital and the Business Cycle," Journal of Industrial Economics, Wiley Blackwell, vol. 52(2), pages 255-276, June.
  • Handle: RePEc:bla:jindec:v:52:y:2004:i:2:p:255-276
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    Citations

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    Cited by:

    1. Emami Namini, Julian & Facchini, Giovanni & Lopez, Ricardo, 2011. "Export growth and factor market competition: theory and evidence," CEPR Discussion Papers 8256, C.E.P.R. Discussion Papers.
    2. Richard Harris & John Moffat, 2011. "Plant-level Determinants of Total Factor Productivity in Great Britain, 1997-2006," SERC Discussion Papers 0064, Spatial Economics Research Centre, LSE.
    3. Emami Namini, Julian & Facchini, Giovanni & López, Ricardo A., 2013. "Export growth and firm survival," Economics Letters, Elsevier, vol. 120(3), pages 481-486.
    4. Ana M. Fernandes & Caroline Paunov, 2015. "The Risks of Innovation: Are Innovating Firms Less Likely to Die?," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 638-653, July.
    5. Rolf Golombek & Arvid Raknerud, 2012. "Exit dynamics of start-up firms. Does profit matter?," Discussion Papers 706, Statistics Norway, Research Department.
    6. Lopez, Ricardo A., 2006. "Imports of intermediate inputs and plant survival," Economics Letters, Elsevier, vol. 92(1), pages 58-62, July.
    7. repec:eee:touman:v:36:y:2013:i:c:p:377-390 is not listed on IDEAS
    8. Alvarez, Roberto & Görg, Holger, 2009. "Multinationals and plant exit: Evidence from Chile," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 45-51, January.
    9. TOKUI Joji & INUI Tomohiko & Young Gak KIM, 2008. "Embodied Technological Progress and the Productivity Slowdown in Japan," Discussion papers 08017, Research Institute of Economy, Trade and Industry (RIETI).
    10. Martin Falk, 2015. "Returns to investments in new ski lifts: the importance of weather conditions and elevation," ERSA conference papers ersa15p1379, European Regional Science Association.
    11. Rolf Golombek & Arvid Raknerud, 2005. "Exit Dynamics with Adjustment Costs," Discussion Papers 442, Statistics Norway, Research Department.
    12. Yamamura, Eiji, 2009. "Dynamics of social trust and human capital in the learning process: The case of the Japan garment cluster in the period 1968-2005," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 377-389, October.
    13. Ishise, Hirokazu, 2016. "Capital heterogeneity as a source of comparative advantage: Putty-clay technology in a ricardian model," Journal of International Economics, Elsevier, vol. 99(C), pages 223-236.
    14. Boyan Jovanovic & Chung-Yi Tse, 2010. "Entry and Exit Echoes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 514-536, July.
    15. Julian Emami Namini & Giovanni Facchini & Ricardo A. Lopez, 2011. "Export Growth and Factor Market Competition: Theory and Some Evidence," Tinbergen Institute Discussion Papers 11-013/2, Tinbergen Institute.

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