Asymmetric Cycles

Boyan Jovanovic ()

The Review of Economic Studies, 2006, vol. 73, issue 1, 145-162

Abstract: I estimate a model in which new technology entails random adjustment needs. Rapid adjustments may cause measured productivity to decline. The slow-downs persist because adjustment is costly, and hence protracted. The model explains both the “steepness” and the “deepness” asymmetry of cycles. Adjustment costs amount to about 14% of output and technological inefficiency to about 28%. Firms abandon technologies long before they are perfected—current practice total factor productivity (TFP) is 20% below its maximal level. Copyright 2006, Wiley-Blackwell.

Date: 2006
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Working Paper: Asymmetric Cycles (2004)
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