Working Paper: NBER ID: w10573
Authors: Boyan Jovanovic
Abstract: 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.
Keywords: Technology shocks; Business cycles; Productivity
JEL Codes: E3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| technology shocks (D89) | growth rates (O40) |
| technology adoption (O33) | productivity levels (O49) |
| technology adoption (O33) | growth rate volatility (O49) |
| growth volatility (O41) | growth rates (O40) |
| adjustment costs (J30) | technology abandonment (O33) |