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Technology Locks, Creative Destruction And Non-Convergence In Productivity Levels

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April 1995

Written by: Douglas W Dwyer

Working Paper Number:

CES-95-06

Abstract

This paper presents a simple solution to a new model that seeks to explain the distribution of plants across productivity levels within an industry, and empirically confirms some key predictions using the U.S. textile industry. In the model, plants are locked into a given productivity level, until they exit or retool. Convex costs of adjustment captures the fact that more productive plants expand faster. Provided there is technical change, productivity levels do not converge; the model achieves persistent dispersion in productivity levels within the context of a distortion free competitive equilibrium. The equilibrium, however, is rather turbulent; plants continually come on line with the cutting edge technology, gradually expand and finally exit or retool when they cease to recover their variable costs. The more productive plants create jobs, while the less productive destroy them. The model establishes a close link between productivity growth and dispersion in productivity levels; more rapid productivity growth leads to more widespread dispersion. This prediction is empirically confirmed. Additionally, the model provides an explanation for S-shaped diffusion.

Document Tags and Keywords

Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

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demand, market, production, productive, economist, productivity growth, model, growth, technological, labor productivity, industry productivity, labor, produce, endogenous, factory, innovation, expenditure, rates productivity, dispersion productivity, profit, equilibrium, plant productivity, profitable, regressing, industry concentration, productivity dispersion, textile

Tags Tags are automatically generated using a pretrained language model from spaCy, which excels at several tasks, including entity tagging.

The model is able to label words and phrases by part-of-speech, including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are identified to contain references to specific institutions, datasets, and other organizations. :
Longitudinal Research Database, Center for Economic Studies, Total Factor Productivity, Columbia University, Cobb-Douglas, Department of Economics

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