The Life Cycles of Industrial Plants
October 2001
Working Paper Number:
CES-01-10
Abstract
The paper presents a dynamic programming model with multiple classes of capital goods to explain capital expenditures on existing plants over their lives. The empirical specification shows that the path of capital expenditures is explained by (a) complementarities between old and new capital goods, (b) the age of plants, (c) an index that captures the rate of technical change and (d) the labor intensiveness of a plant when it is newly born. The model is tested with Census data for roughly 6,000 manufacturing plants that were born after 1972.
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investment,
production,
manufacturing,
industrial,
growth,
technological,
investing,
produce,
efficiency,
producing,
expenditure,
plant investment,
profit,
plants industry,
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manufacturing plants
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Standard Industrial Classification,
Longitudinal Research Database,
National Bureau of Economic Research,
Bureau of Economic Analysis,
Census Bureau Longitudinal Business Database
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