What Happens after a Technology Shock?
54 Pages Posted: 18 Aug 2003
Date Written: June 2003
We provide empirical evidence that a positive shock to technology drives up per capita hours worked, consumption, investment, average productivity and output. This evidence contrasts sharply with the results reported in a large and growing literature that argues, on the basis of aggregate data, that per capita hours worked fall after a positive technology shock. We argue that the difference in results primarily reflects specification error in the way that the literature models the low-frequency component of hours worked.
Keywords: productivity, long-run restriction, hours worked, weak instruments
JEL Classification: E32, E24
Suggested Citation: Suggested Citation