R. Caballero – Specificity and the Macroeconomics of Restructuring

The core mechanism that drives economic growth in modern market economies is massive microeconomic restructuring and factor reallocation the Schumpeterian creative destruction by which new technologies replace the old. At the microeconomic level, restructuring is characterized by countless decisions to create and destroy production arrangements. The efficiency of these decisions depends in large part on the existence of sound institutions that provide a proper transactional environment.