Journal article
Endogenous product turnover and macroeconomic dynamics
- Abstract:
- This paper introduces endogenous product entry and exit based on creation and destruction of product variety in a general equilibrium model. Recessionary technology shocks induce exit of unprofitable products on impact, allocating resources towards more productive production lines. However, during the recovery phase, less productive production lines survive destruction, counteracting the original increase in productivity. The analysis shows that recoveries hinge on lower product destruction rather than higher product creation. We find that product heterogeneity and the persistence of technology shocks play a critical role for the cyclicality of product turnover. Endogenous product destruction is important to evaluate the effect of permanent policies of entry deregulation and subsidies aimed to stimulate the economy.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
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- Files:
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(Preview, Accepted manuscript, pdf, 981.4KB, Terms of use)
-
- Publisher copy:
- 10.1016/j.red.2017.06.003
Authors
+ Zengin Foundation
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- Grant:
- the Grant-in-Aid for Young Scientists B (JSPS 15K17027
- Publisher:
- Elsevier
- Journal:
- Review of Economic Dynamics More from this journal
- Volume:
- 26
- Pages:
- 263-279
- Publication date:
- 2017-07-04
- Acceptance date:
- 2017-06-26
- DOI:
- ISSN:
-
1094-2025
- Keywords:
- Pubs id:
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pubs:707696
- UUID:
-
uuid:eba66a0e-6c9f-4443-a6f9-2b2867b1f233
- Local pid:
-
pubs:707696
- Source identifiers:
-
707696
- Deposit date:
-
2017-07-11
- ARK identifier:
Terms of use
- Copyright holder:
- Elsevier Inc
- Copyright date:
- 2017
- Notes:
- Copyright © 2017 Elsevier Inc. This is the accepted manuscript version of the article. The final version is available online from Elsevier at: https://doi.org/10.1016/j.red.2017.06.003
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