Entry, Exit, and Plant-Level Dynamics over the Business Cycle

Yoonsoo Lee () and Toshihiko Mukoyama

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: This paper analyzes the implications of plant-level dynamics over the business cycle. We first document basic patterns of entry and exit of U.S. manufacturing plants, in terms of employment and productivity, between 1972 and 1997. We show how entry and exit patterns vary during the business cycle, and that the cyclical pattern of entry is very different from the cyclical pattern of exit. Second, we build a general equilibrium model of plant entry, exit, and employment and compare its predictions to the data. In our model, plants enter and exit endogenously, and the size and productivity of entering and exiting plants are also determined endogenously. Finally, we explore the policy implications of the model. Imposing a firing tax that is constant over time can destabilize the economy by causing fluctuations in the entry rate. Entry subsidies are found to be effective in stabilizing the entry rate and output.

Keywords: plant-level dynamics; entry and exit; business cycles (search for similar items in EconPapers)
JEL-codes: E23 E32 L11 L60 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2008-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (53)

Downloads: (external link)
https://www2.census.gov/ces/wp/2008/CES-WP-08-17.pdf First version, 2008 (application/pdf)

Related works:
Working Paper: Entry, exit and plant-level dynamics over the business cycle (2008)
Working Paper: Entry, Exit, and Plant-level Dynamics over the Business Cycle (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:08-17

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