| DISPLACED CAPITAL: A Study of Aerospace Plant Closings (2000) | |||||||||||||||||
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| Using equipment-level data from aerospace plants that closed during the 1990s, this paper studies the process of moving installed physical capital to a new use. The analysis yields three results that suggest significant sectoral specificity of physical capital and costs of re-deploying the capital. First, other aerospace companies are over-represented among buyers of the used capital relative to their representation in the market for new investment goods. Second, even after taking into account age-related depreciation, capital sells for a substantial discount relative to replacement cost. The more specialized the type of capital, the greater is the discount. Yet, capital that sells to other aerospace firms fetches a higher price than capital sold to industry outsiders. Finally, the process of winding down operations and selling the equipment takes several years. _____________________ We are greatly indebted to the managers, auctioneers, and machine tool salesman who provided us with ... | |||||||||||||||||
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