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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. John Haltiwanger & Russell Cooper & Laura Power, 1999. "Machine Replacement and the Business Cycle: Lumps and Bumps," American Economic Review, American Economic Association, vol. 89(4), pages 921-946, September.
  2. Oivind Anti Nilsen & Fabio Schiantarelli, 1996. "Zeroes and Lumps in Investment: Empirical Evidence on Irreversibilities and Non-Convexities," Boston College Working Papers in Economics 337., Boston College Department of Economics, revised 01 Nov 2000.
  3. Sakellaris, Plutarchos, 2004. "Patterns of plant adjustment," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 425-450, March.
  4. J. Bradford Jensen & Robert H. McGuckin & Kevin Stiroh, 2000. "The Impact of Vintage and Survival on Productivity: Evidence from Cohorts of U.S. Manufacturing Plants," Economics Program Working Papers 00-01, The Conference Board, Economics Program.
  5. Campa, José Manuel, 2000. "Exchange Rates and Trade: How Important is Hysteresis in Trade?," CEPR Discussion Papers 2606, C.E.P.R. Discussion Papers.
  6. Verbeek, M. & Nijman, T., 1990. "Testing For Selectivity Bias In Panel Data Models," Papers 9018, Tilburg - Center for Economic Research.
  7. 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.
  8. 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.
  9. Nijman, T.E. & Verbeek, M.J.C.M., 1992. "Testing for selectivity in panel data models," Other publications TiSEM 7ec34a6c-1d84-4052-971c-d, School of Economics and Management.
  10. repec:ner:tilbur:urn:nbn:nl:ui:12-153280 is not listed on IDEAS
  11. Omar Licandro & Reyes Maroto & Luis A. Puch, . "Patterns of Investment in Spanish Manufacturing Firms," Studies on the Spanish Economy 185, FEDEA.
  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. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, March.
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