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The Scale of Production in Technological Revolutions

Staff Report 269 | Published April 1, 2000

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Author

Matthew F. Mitchell

The Scale of Production in Technological Revolutions

Abstract

Many manufacturing industries, including the computer industry, have seen large increases in productivity growth rates and have experienced a reduction in average establishment size and a decrease in the variance of the sizes of plants. A vintage capital model is introduced where learning increases productivity on any given technology and firms choose when to adopt a new vintage. In the model, a rise in the rate of technological change leads to a decrease in both the mean and variance of the size distribution.