NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Displaced Capital

Valerie A. Ramey, Matthew D. Shapiro

NBER Working Paper No. 6775
Issued in October 1998
NBER Program(s):   EFG   PR

This paper studies the efficiency with which physical capital can be reallocated across sectors. It presents a model of a firm selling specialized capital in a thin resale market. The model predicts that the selling price depends not only on the sectoral specificity of capital, but also on the thinness of the market and the discount factor of the firm. It then provides empirical evidence on the sectoral mobility of capital based on equipment-level data from aerospace industry auctions. These data track the flow of used capital across industries, as well as the discounts at which the capital sells. The results suggest substantial sectoral specificity of capital. Capital that flowed out of the sector sold for only one-third of its estimated replacement cost.

download in pdf format
   (240 K)

email paper

This paper is available as PDF (240 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: Valerie A. Ramey & Matthew D. Shapiro, 2001. "Displaced Capital: A Study of Aerospace Plant Closings," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 958-992, October.

Users who downloaded this paper also downloaded these:
Ramey and Shapiro w6283 Costly Capital Reallocation and the Effects of Government Spending
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us