Re: lets play a game of questions
In the modern U.S. economy, plant exit leads plant entry, entry is moderately procyclical, and exit is countercyclical and has a strong leading relationship with both output and total factor productivity growth. The association of entry and exit with aggregate productivity growth suggests that their fluctuations have a technological origin. In a model economy where plants embody technology, the exit of weak incumbent plants accelerates following an improvement in the leading edge technology. Later, when plants embodying the improvement begin operation, aggregate output and productivity rise. A version of the model mimics the cyclical behavior of entry and exit, suggesting the importance of shocks to the rate of embodied technological change for economic fluctuations.