TY - JOUR
T1 - Entry and exit echoes
AU - Jovanovic, Boyan
AU - Tse, Chung Yi
N1 - Funding Information:
✩ We thank G. Violante (editor), an associate editor of the journal, an anonymous referee, A. Gavazza, M. Gort, X. Gabaix, S. Greenstein, C. Helfat, O. Licandro, S. Klepper, S. Kortum, M. Kredler, and T. Bar for comments, R. Agarwal for providing data, and the NSF and Kauffman Foundation for support. In earlier versions, the title of this paper was “Creative destruction at the industry level”. * Corresponding author. E-mail address: [email protected] (B. Jovanovic). 1 Early examples are Johansen (1959), Arrow (1962) who model steady states. 2 Boucekkine et al. (1997) and Mitra et al. (1991) study dynamics in this class of models. 3 The figure uses data from Gort and Klepper (1982, henceforth GK). GK measure an industry’s age from the date that the product was commercially introduced, i.e., from the date of its first sales. The shakeout period is defined as the epoch during which the number of firms is declining. GK say that an ‘exit’ occurs when a firm stops making the product in question, even if that firm continues to make other products. GK time the start of the shakeout
PY - 2010/7
Y1 - 2010/7
N2 - While aggregate data do not show the investment echoes predicted by vintage-capital models, echoes arise in rates of entry and exit of firms at the industry level. Moreover, industries where prices decline rapidly experience early 'shakeouts'. The relation emerges naturally in a vintage-capital model in which exit of firms sometimes accompanies the replacement of their capital, and in which a shakeout is the first replacement 'echo' of the capital created when the industry is born.
AB - While aggregate data do not show the investment echoes predicted by vintage-capital models, echoes arise in rates of entry and exit of firms at the industry level. Moreover, industries where prices decline rapidly experience early 'shakeouts'. The relation emerges naturally in a vintage-capital model in which exit of firms sometimes accompanies the replacement of their capital, and in which a shakeout is the first replacement 'echo' of the capital created when the industry is born.
KW - Vintage capital
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U2 - 10.1016/j.red.2009.07.004
DO - 10.1016/j.red.2009.07.004
M3 - Article
AN - SCOPUS:77953727401
SN - 1094-2025
VL - 13
SP - 514
EP - 536
JO - Review of Economic Dynamics
JF - Review of Economic Dynamics
IS - 3
ER -