I estimate a model in which new technology entails random adjustment costs. Rapid adjustments may cause productivity slowdowns. These slowdowns last longer when retooling is costly. The model explains why growth-rate disasters are more likely than miracles, and why volatility of growth relates negatively to growth over time. I estimate the model, and the estimates have surprising implications. Firms seem to abandon technologies long before they are perfected current-practice TFP is 17 percent below best-practice.
Document Object Identifier (DOI): 10.3386/w10573
Published: Jovanovic, Boyan. "Asymmetric Cycles," Review of Economic Studies, 2006, v73(1,Jan), 145-162.
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