TY  - JOUR
AU  - Jovanovic,Boyan
AU  - Tse,Chung-Yi
TI  - Creative Destruction in Industries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12520
PY  - 2006
Y2  - September 2006
UR  - http://www.nber.org/papers/w12520
L1  - http://www.nber.org/papers/w12520.pdf
N1  - Author contact info:
Boyan Jovanovic
New York University
Department of Economics
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8953
Fax: 212/995-4186
E-Mail: Boyan.Jovanovic@nyu.edu

Chung-Yi Tse
School of Economics and Finance
University of Hong Kong
Pokfulam Road
Hong Kong
Tel: 852/2859-1035
Fax: 852/2548-1152
E-Mail: tsechung@econ.hku.hk
M3  - presented at "Productivity Progam Meeting", March 17, 2006
AB  - Most industries go through a "shakeout" phase during which the number of producers in the industry declines. Industry output generally continues to rise, however, which implies a reallocation of capacity from exiting firms to incumbents and new entrants. Thus shakeouts seem to be classic creative destruction episodes. Shakeouts of firms tend to occur sooner in industries where technological progress is rapid. Existing models do not explain this. Yet the relation emerges naturally in a vintage-capital model in which shakeouts of firms accompany the replacement of capital, and in which a shakeout is the first replacement echo of the capital created when the industry is born. We fit the model to the Gort-Klepper data and to Agarwal's update of those data.
ER  -