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The impacts of technological change, industry structure and Plant entry/exit on industry efficiency growth

Raies Asma ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we provide a theoretical framework combining both the theory of adoption and industry evolution to explore the different sources of industry efficiency growth. The objective is to investigate which of the explanatory variables can explain inefficiency. The theoretical and simulation results of this study show that the inter-firms efficiency variance exerts a substantial impact on industry efficiency. Productivity change within individual plant (via adoption and learning) is a major source of efficiency growth in the industry. Exit usually improves aggregate efficiency as less efficient plants leave industries. The impact of entry is less clear since it depends on the efficiency levels of entrants. Finally, the role of competition in generating economic efficiency is strongly confirmed. Our theoretical findings confirm and extend others in the empirical studies.

Keywords: Technological Change; Industry Structure; Plant Entry/Exit; industry efficiency growth (search for similar items in EconPapers)
JEL-codes: L22 O3 O33 (search for similar items in EconPapers)
Date: 2006-12
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Published in The Business Review, Cambridge Number 2.Vol. 6(2006): pp. 1-12

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