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This paper analyzes the implications of plant-level dynamics over the business cycle. The authors first document the basic patterns of entry and exit of U.S. manufacturing plants, in terms of employment and productivity, between 1972 and 1997. They show how entry and exit patterns vary during the business cycle, and that the cyclical pattern of entry is very different from the cyclical pattern of exit. Second, they build a general equilibrium model of plant entry, exit, and employment and compare its predictions to the data.
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