Survival duration of plants: Evidence from the US petroleum refining industry

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Abstract

This paper presents a duration analysis on the survival of US petroleum refining plants for the 1981-1986 period, when the industry as a whole declines in response to the decontrol of crude oil markets. The purpose is to examine the duration dependence and determinants of post-deregulation plant lifetimes. The Weibull model with the correction for unobserved individual heterogeneity provides a better fit to the data. Empirical results show that plant size, age, regulatory subsidies, technology use, and multiplant coordination are key determinants of refinery life duration after deregulation. In addition, major integrated oil companies tend to make timely restructuring via refinery closures and sales. The interactive effects of size and technology use and of multiplant coordination and integrated organization are also important to the refinery survival.

Original languageEnglish
Pages (from-to)517-555
Number of pages39
JournalInternational Journal of Industrial Organization
Volume20
Issue number4
DOIs
StatePublished - Apr 2002

Keywords

  • Duration analysis
  • Multiplant coordination
  • Post-deregulation survival
  • Regulatory subsidy
  • Technology use

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