The introduction of new production processes can have dramatic effects on aggregate productivity within an industry. This research explores the impact of the major technological innovation of the minimill on the US steel industry, analyzing detailed producer-level data on prices and production over a 40-year period. The study illustrates how technology can drive reallocation: the market share of plants using minimills rose significantly, but the older technology of vertically integrated production was not entirely displaced. Instead, less productive vertically integrated plants were driven out of the industry and output was reallocated to more efficient producers.
When new technologies enter the market, older products are often removed from store shelves. This article asks whether such product elimination is socially efficient. It studies this question in the context of the American Home PC market between 2001 and 2004. Empirically, the paper documents consumer heterogeneity and then studies how the major innovation of the time—Intel’s Pentium M™ processor—contributed to social welfare.