Capital resalability, productivity dispersion, and market structure

Natarajan Balasubramanian, Jagadeesh Sivadasan

Research output: Contribution to journalArticle

14 Scopus citations

Abstract

We propose an industry-level index of capital resalability-the share of used capital in aggregate industry capital expenditure-that relates (inversely) to sunkenness of investments. Using data from U.S. manufacturing, we then test the effect of capital resalability on industry productivity dispersion, mean productivity, and industry concentration. As predicted by standard models of industry equilibrium with heterogeneous firms, we find that increases in capital resalability are associated with a reduction in productivity dispersion, and an increase in the mean and median of the productivity distribution. Furthermore, we find that capital resalability is negatively correlated with industry concentration.

Original languageEnglish (US)
Pages (from-to)547-557
Number of pages11
JournalReview of Economics and Statistics
Volume91
Issue number3
DOIs
StatePublished - Aug 1 2009
Externally publishedYes

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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