New Plants as Natural Experiments in Economic Adjustment: Adjustment Costs, Learning-by-Doing and Lumpy Investment

38 Pages Posted: 19 Jan 2000

See all articles by James E. Bessen

James E. Bessen

Technology & Policy Research Initiative, BU School of Law

Date Written: November 1999

Abstract

A large sample of new plants is studied to reveal detailed adjustment behavior for capital, labor and productivity. Once production has begun, capital adjusts almost as quickly as labor. Overall, capital adjustment is lumpy while labor follows a learning-by-doing model rather than a convex adjustment cost model. Plants are quite heterogeneous, however: convex adjustment costs appear important at small plants, but large plants exhibit lumpy investment and substantial investment in learning-by-doing. A positive association between plant productivity growth and wages (and also the change in wages) corroborates the importance of learning-by-doing. Also, learning-by-doing appears to influence the behavior of large plants subsequent to startup.

JEL Classification: D24, D83, J24

Suggested Citation

Bessen, James E., New Plants as Natural Experiments in Economic Adjustment: Adjustment Costs, Learning-by-Doing and Lumpy Investment (November 1999). Available at SSRN: https://ssrn.com/abstract=194368 or http://dx.doi.org/10.2139/ssrn.194368

James E. Bessen (Contact Author)

Technology & Policy Research Initiative, BU School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
121
Abstract Views
1,100
rank
260,285
PlumX Metrics