TY  - JOUR
AU  - Basu,Susanto
AU  - Fernald,John
AU  - Kimball,Miles
TI  - Are Technology Improvements Contractionary?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10592
PY  - 2004
Y2  - June 2004
UR  - http://www.nber.org/papers/w10592
L1  - http://www.nber.org/papers/w10592.pdf
N1  - Author contact info:
Susanto Basu
Department of Economics
Boston College
140 Commonwealth Avenue
Chestnut Hill, MA 02467
Tel: 617/552-2182
Fax: 617/552-2308
E-Mail: susanto.basu@bc.edu

John Fernald
Research Department, Mail Stop 1130
Federal Reserve Bank of San Francisco
101 Market St
San Francisco, CA 94105
Tel: 415-974-2135
Fax: 815-642-0515
E-Mail: john.fernald@sf.frb.org

Miles S. Kimball
Department of Economics
University of Michigan
Ann Arbor, MI  48109-1220
Tel: 734/764-2375
Fax: 734/764-2769
E-Mail: mkimball@umich.edu
AB  - 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 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 and investment demand generally fall in the short run, and output itself may also fall.
ER  -