TY  - JOUR
AU  - Atkeson,Andrew
AU  - Kehoe,Patrick
TI  - Industry Evolution and Transition: A Neoclassical Benchmark
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6005
PY  - 1997
Y2  - April 1997
UR  - http://www.nber.org/papers/w6005
L1  - http://www.nber.org/papers/w6005.pdf
N1  - Author contact info:
Andrew Atkeson
Bunche Hall 9381
Department of Economics
UCLA
Box 951477
Los Angeles, CA  90095-1477
Tel: 866/312-9770
Fax: 310/825-9528
E-Mail: andy@atkeson.net

Patrick Kehoe
Research Department
Federal Reserve Bank of Minneapolis
90 Hennepin Avenue
Minneapolis, MN  55480-0291
Tel: 612/204-5525
Fax: 612/204-5515
E-Mail: pkehoe@res.mpls.frb.fed.us
AB  - Recently, a large number of countries have undertaken major reforms that have led to a large increase in the number of new enterprises.  After these reforms, however, it has taken a number of  years before output and productivity have begun to grow.  The thesis of this paper is that the process of starting new enterprises is turbulent and time-consuming and as a result, it takes time before the benefits of reform show up in increases in measured output and productivity.  To establish a neoclassical benchmark for reforming economies, we ask what the path of transition looks like in a reforming economy for which the process governing the growth of new enterprises looks like it does in the U.S., a well-functioning market economy.  We find that it takes 5-7 years until measured output and productivity begin to grow rapidly following reform.  This finding suggests that, even if all other aspects of the economy are perfect, the transition following economy-wide reforms should take a substantial amount of time.
ER  -