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Innovation, Machine Replacement and Productivity

  • Luis A. Puch
  • Omar Licandro

    ()

    (Economics European University Institute)

  • Reyes Maroto

This paper explores the role of replacement and innovation in shaping investment and productivity during episodes of lumpy adjustment in capital. To this purpose we use a rich firm-level panel of Spanish manufacturing data that combines information on equipment investment and firm's strategies. Investment concentrates on episodes of high investment, or investment spikes, but its nature depends upon observable heterogeneity. We find evidence of replacement activity for firms involved in neither process innovation nor plant expansion. Then, we explore how large investment episodes transmit into the evolution of productivity under different innovative strategies. We find that productivity increases after an investment spike in innovative firms. However, long learning curves seem to be associated with innovative investments.

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Paper provided by Society for Economic Dynamics in its series 2005 Meeting Papers with number 606.

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Date of creation: 2005
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Handle: RePEc:red:sed005:606
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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  1. Plutarchos Sakellaris, 2001. "Patterns of plant adjustment," Finance and Economics Discussion Series 2001-05, Board of Governors of the Federal Reserve System (U.S.).
  2. Øivind Anti Nilsen & Fabio Schiantarelli, 2003. "Zeros and Lumps in Investment: Empirical Evidence on Irreversibilities and Nonconvexities," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1021-1037, November.
  3. repec:ner:tilbur:urn:nbn:nl:ui:12-153280 is not listed on IDEAS
  4. Francis Vella, 1998. "Estimating Models with Sample Selection Bias: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 127-169.
  5. Verbeek, M. & Nijman, T., 1990. "Testing For Selectivity Bias In Panel Data Models," Papers 9018, Tilburg - Center for Economic Research.
  6. Russell Cooper & John Haltiwanger & Laura Power, 1995. "Machine Replacement and the Business Cycle: Lumps and Bumps," NBER Working Papers 5260, National Bureau of Economic Research, Inc.
  7. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557.
  8. J. Bradford Jensen & Robert H McGuckin & Kevin J Stiroh, 2000. "The Impact of Vintage and Survival on Productivity: Evidence from Cohorts of U.S. Manufacturing Plants," Working Papers 00-06, Center for Economic Studies, U.S. Census Bureau.
  9. Campa, Jose M., 2000. "Exchange rates and trade: How important is hysteresis in trade?," IESE Research Papers D/427, IESE Business School.
  10. Nijman, T.E. & Verbeek, M.J.C.M., 1992. "Testing for selectivity in panel data models," Other publications TiSEM 7ec34a6c-1d84-4052-971c-d, Tilburg University, School of Economics and Management.
  11. Mark Doms & Timothy Dunne, 1994. "Capital Adjustment Patterns in Manufacturing Plants," Working Papers 94-11, Center for Economic Studies, U.S. Census Bureau.
  12. Laura Power, 1998. "The Missing Link: Technology, Investment, And Productivity," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 300-313, May.
  13. Omar Licandro & Reyes Maroto & Luis A. Puch, . "Patterns of Investment in Spanish Manufacturing Firms," Studies on the Spanish Economy 185, FEDEA.
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