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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.

Suggested Citation

  • Andrew Atkeson & Patrick Kehoe, 1997. "Industry Evolution and Transition: A Neoclassical Benchmark," NBER Working Papers 6005, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6005
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    References listed on IDEAS

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    Cited by:

    1. Pavel Kadochnikov, 2006. "An Analysis of Import Substitution in Russia after the 1998 Crisis," Research Paper Series, Gaidar Institute for Economic Policy, issue 95, pages 148-148.
    2. Howell, Bronwyn, 2008. "The Role of Price Structure in Telecommunications Technology Diffusion," Working Paper Series 4011, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    3. John D. Stiver, 2003. "Technology Creation, Diffusion, and Growth Cycles," Working papers 2003-35, University of Connecticut, Department of Economics.
    4. Bronwyn HOWELL & Arthur GRIMES, 2010. "Productivity Questions for Public Sector Fast Fibre Network Financiers," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(78), pages 127-146, 2nd quart.
    5. Boyan Jovanovic & Peter L. Rousseau, 2000. "Vintage organization capital," Proceedings, Federal Reserve Bank of San Francisco, issue Apr.
    6. Vivek Dehejia & Douglas Dwyer, 2004. "Output and unemployment dynamics in transition," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 7(2), pages 69-81.
    7. Howell, Bronwyn & Obren, Mark, 2002. "Broadband Diffusion: Lags from Vintage Capital, Learning by Doing, Information Barriers and Network Effects," Working Paper Series 3896, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    8. Philip Auerswald, 2008. "Entrepreneurship in the Theory of the Firm," Small Business Economics, Springer, vol. 30(2), pages 111-126, February.
    9. Phelan, Christopher & Trejos, Alberto, 2000. "The aggregate effects of sectoral reallocations," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 249-268, April.
    10. Bart Hobijn & Boyan Jovanovic, 2001. "The Information-Technology Revolution and the Stock Market: Evidence," American Economic Review, American Economic Association, vol. 91(5), pages 1203-1220, December.
    11. Davis, Steven J., 2000. "Reorganization: A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 52(1), pages 23-31, June.
    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.
    13. repec:eee:labchp:v:3:y:1999:i:pb:p:2711-2805 is not listed on IDEAS
    14. Rodolfo E. Manuelli, 2000. "Technological Change, the Labor Market and the Stock Market," NBER Working Papers 8022, National Bureau of Economic Research, Inc.
    15. 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.

    More about this item

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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