Are technology improvements contractionary

Description

"Yes. We construct a measure of aggregate technology change, controlling for varying utilization of capital and labor, non-constant returns and imperfect competition, and aggregation effects. On impact, when technology improves, input use and non-residential investment fall sharply. Output changes little. With a lag of several years, inputs and investment return to normal and output rises strongly. We discuss what models could be consistent with this evidence. For example, standard onesector 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 and investment demand generally fall in the short run, and output itself may also fall"--Federal Reserve Bank of Chicago web site.

Subjects

Series Statement

• NBER working paper series -- no. 10592.
• Working paper series (National Bureau of Economic Research) -- working paper no. 10592.

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Other Editions

• Are technology improvements contractionaryNational Bureau of Economic Research2004-01-01
• Are technology improvements contractionary?Electronic resourceFederal Reserve Bank of Chicago2004-01-01
• Are technology improvements contractionary?Electronic resourceNational Bureau of Economic Research2004-01-01