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Entry, Exit, Embodied Technology, and Business Cycles

Jeffrey R. Campbell

Federal Reserve Bank of Chicago

March 1997

NBER Working Paper No. w5955

This paper studies the entry and exit of U.S. manufacturing plants over the business cycle and compares the results with those from a vintage capital model augmented to reproduce observed features of the plant life cycle. Looking at the entry and exit of plants provides new evidence supporting the hypothesis that shocks to embodied technological change are a significant source of economic fluctuations. In the U.S. economy, the entry rate covaries positively with output and total factor productivity growth, and the exit rate leads all three of these. A vintage capital model in which all technological progress is embodied in new plants reproduces these patterns. In the model economy, a persistent improvement to embodied technology induces obsolete plants to cease production, causing exit to rise. Later, as entering plants embodying the new technology become operational, both output and productivity increase.

Number of Pages in PDF File: 36

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Date posted: August 26, 2000  

Suggested Citation

Campbell, Jeffrey R., Entry, Exit, Embodied Technology, and Business Cycles (March 1997). NBER Working Paper No. w5955. Available at SSRN: https://ssrn.com/abstract=225735

Contact Information

Jeffrey R. Campbell (Contact Author)
Federal Reserve Bank of Chicago ( email )
230 South LaSalle Street
Chicago, IL 60604-1413
United States
312-322-6156 (Phone)
312-322-2357 (Fax)
HOME PAGE: http://www.nber.org/~jrc
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