Technological Standardization, Endogenous Productivity and Transitory Dynamics

56 Pages Posted: 12 Aug 2014

Date Written: August 2014

Abstract

We uncover technological standardization as a microeconomic mechanism which is vital for the implementation of new technologies, in particular general purpose technologies. The interdependencies of these technologies require common rules (“standardization”) to ensure compatibility. Using data on standardization, we are therefore able to identify technology shocks and analyze their impact on macroeconomic variables. First, our results show that technology shocks diffuse slowly and generate a positive S-shaped reaction of output and investment. Before picking up permanently, total factor productivity temporarily decreases, suggesting that the newly adopted technology is incompatible with installed physical, human and organizational capital. Second, standardization can reveal news about future movements of macroeconomic aggregates as evidenced by the positive and immediate reaction of stock market variables to the identified technology shock.

Keywords: technology adoption, business cycle dynamics, standards, aggregate productivity, Bayesian vector autoregressions

JEL Classification: E32, O31, O33

Suggested Citation

Baron, Justus and Schmidt, Julia, Technological Standardization, Endogenous Productivity and Transitory Dynamics (August 2014). Banque de France Working Paper No. 503, Available at SSRN: https://ssrn.com/abstract=2478707 or http://dx.doi.org/10.2139/ssrn.2478707

Justus Baron (Contact Author)

Northwestern University - Searle Center for Law, Regulation and Economic Growth ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States

HOME PAGE: http://justusbaron.org/

Julia Schmidt

Banque de France ( email )

Paris
France

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