American Economic Review: Vol. 100 No. 1 (March 2010)


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Entry, Exit, and Investment-Specific Technical Change

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Samaniego, Roberto M. 2010. "Entry, Exit, and Investment-Specific Technical Change." American Economic Review, 100(1): 164-92.

DOI: 10.1257/aer.100.1.164


Using European data, this paper finds that (i) industry entry and exit rates are positively related to industry rates of investment-specific technical change (ISTC); and (ii) the sensitivity of industry entry and exit rates to cross-country differences in entry costs depends on industry rates of ISTC. The paper constructs a general equilibrium model in which the rate of ISTC varies across industries and new investment-specific technologies can be introduced by entrants or by incumbents. In the calibrated model, equilibrium behavior is consistent with stylized facts (i) and (ii), provided the cost of technology adoption is increasing in the rate of ISTC. (JEL G31, L11, O31, O33)

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Samaniego, Roberto M. (George Washington U)

JEL Classifications

G31: Capital Budgeting; Fixed Investment and Inventory Studies
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
O31: Innovation and Invention: Processes and Incentives
O33: Technological Change: Choices and Consequences; Diffusion Processes

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