NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

What Do Technology Shocks Do?

John Shea

NBER Working Paper No. 6632
Issued in July 1998
NBER Program(s):   ME

The real business cycle literature has largely ignored the empirical question of what role technology shocks actually play in business cycles. The observed procyclicality of total factor productivity (TFP) does not prove that technology shocks are important to business cycles, since demand shocks could generate procyclical TFP due to increasing returns or other reasons. I address the role of technology by investigating the dynamic interactions of inputs, TFP and two observable indicators of technology shocks: R+D spending and patent applications. Using annual panel data on 19 US manufacturing industries from 1959 -1991, I find that favorable R+D or patent shocks tend to increase inputs, especially labor, in the short run, but to decrease inputs in the long run, while tilting the mix of inputs towards capital and nonproduction labor. Favorable technology shocks do not significantly increase measured TFP at any horizon, except for a subset of industries dominated by process innovations, suggesting that available price data do not capture productivity improvements due to product innovations. Technology shocks explain only a small fraction of input and TFP volatility at business cycle horizons.

download in pdf format
   (1458 K)

email paper

This paper is available as PDF (1458 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6632

Published:

Users who downloaded this paper also downloaded these:
Shea What Do Technology Shocks Do?
Basu, Fernald, and Kimball w10592 Are Technology Improvements Contractionary?
Christiano, Eichenbaum, and Vigfusson w9819 What Happens After a Technology Shock?
Gali w5721 Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations
Shea w5305 Complementarities and Comovements
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us