A Theory of Entry and Exit with Embodied Rate of Technical Change
Roberto M Samaniego
The paper presents a vintage capital model that is consistent with the the relationship between the rate of embodied technical change and the rate of entry and exit across industries. In the model, the costs imposed by the regulation of entry may bias the sectoral composition of an economy towards industries in which the rate of technical change is low -- an effect termed technological skew. This prediction matches the empirical relationship between institutional entry costs and several indicators of sectoral composition across industrialized economies
Entry, exit, embodied technical change, regulation of entry, sectoral composition, technological skew, information technology, services.
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