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Expansionary and Contractionary Technology Improvements

Almut Balleer () and Zeno Enders

Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: This paper examines the effects of expansionary technology shocks (shocks that increase labor productivity and factor inputs) as opposed to contractionary technology shocks (shocks that increase labor productivity, but decrease factor inputs). We estimate these two shocks jointly based on a minimum set of identifying restrictions in a structural VAR. We show that most of the business cycle variation of key macroeconomic variables such as output and consumption is driven by expansionary technology shocks. However, contractionary technology shocks are important to understand the variation in labor productivity and production inputs. In addition, these shocks trigger different reactions of certain variables, which can help explain why existing evidence on technology shocks does not deliver clear results. In a simple DSGE model with managerial technology, which is consistent with our identifying restrictions, we interpret contractionary technology shocks as process innovations and motivate the difference to expansionary technology shocks.

JEL-codes: E32 E24 E25 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-eff and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:80046

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