Death in the Industrial World: Plant Closures and Capital Retirement

John Baldwin

Economic Analysis (EA) Research Paper Series from Statistics Canada, Analytical Studies Branch

Abstract: Plant deaths arise from failure when firms exit an industry. Plant deaths are also associated with renewal when incumbent firms close down plants and modernize their production facilities and start-up new plants. The rate of plant deaths affects the amount of change that occurs in labour and capital markets. Plant deaths result in job losses and incur significant human costs as employees are forced to seek other work. The death process also gives rise to capital losses - to the loss of earlier investments that the industrial system had made in productive capacity. This paper makes use of the plant-death date to provide new information on the likely length of life of capital invested in plants. This paper measures the death rate over a forty year period for new plants in the Canadian manufacturing sector. It develops a profile of the death rate for entrants as they age. On average, 14% of new plants die in their first year. Over half of new plants die by the age of six. By the age of 15, less than 20% are still alive. As a result, manufacturing plants have relatively short lives. The average new plant lives only nine years (17 years if the average is employment-weighted). These rates vary by industry. The longest length of life (13 years) can be found in two industries -primary metals and paper and allied products. The shortest average length of life (less than 8 years) occurs in wood industries.

Keywords: Manufacturing; Business performance and ownership; Entry; exit; mergers and growth (search for similar items in EconPapers)
Date: 2005-05-04
New Economics Papers: this item is included in nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=11F0027M2005033&lang=eng (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:stc:stcp5e:2005033e

Access Statistics for this paper

More papers in Economic Analysis (EA) Research Paper Series from Statistics Canada, Analytical Studies Branch Contact information at EDIRC.
Bibliographic data for series maintained by Mark Brown ().