Are Technology Improvements Contractionary?
Boston College, College of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)
John G. Fernald
Federal Reserve Bank of San Francisco
Miles S. Kimball
University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)
Harvard Institute Research Working Paper No. 1986; FRB International Finance Discussion Paper No. 625; FRB of Chicago Working Paper No. 2004-20
Yes. We construct a measure of aggregate technology change, controlling for imperfect competition, varying utilization of capital and labor, and aggregation effects. On impact, when technology improves, input use falls sharply, and output may fall slightly. With a lag of several years, inputs return to normal and output rises strongly. We discuss what models could be consistent with this evidence. For example, standard one-sector real-business-cycle models are not, since they generally predict that technology improvements are expansionary, with inputs and (especially) output rising immediately. However, the evidence is consistent with simple sticky-price models, which predict the results we find: When technology improves, input use generally falls in the short run, and output itself may also fall.
Number of Pages in PDF File: 65
JEL Classification: D24, E32, E52, E22, E24, O47working papers series
Date posted: January 14, 1999
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.812 seconds