Entry, Exit, Embodied Technology, and Business Cycles

Jeffrey Campbell

No 5955, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the entry and exit of U.S. manufacturing plants over the business cycle and compares the results with those from a vintage capital model augmented to reproduce observed features of the plant life cycle. Looking at the entry and exit of plants provides new evidence supporting the hypothesis that shocks to embodied technological change are a significant source of economic fluctuations. In the U.S. economy, the entry rate covaries positively with output and total factor productivity growth, and the exit rate leads all three of these. A vintage capital model in which all technological progress is embodied in new plants reproduces these patterns. In the model economy, a persistent improvement to embodied technology induces obsolete plants to cease production, causing exit to rise. Later, as entering plants embodying the new technology become operational, both output and productivity increase.

JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 1997-03
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Published as Review of Economic Dynamics, Vol. 1, Issue 2 (April 1998): 371-408.

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Related works:
Journal Article: Entry, Exit, Embodied Technology, and Business Cycles (1998)
Working Paper: Computational Appendix to Entry, Exit, Embodied Technology, and Business Cycles (1997)
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