Are technology improvements contractionary?

Description:

"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 onesector 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"--Federal Reserve Bank of Chicago web site.

subjects: Diffusion of Innovation,  Economic aspects,  Economic aspects of Technological innovations,  Economic aspects of Technology,  Effect of technological innovations on,  Input-output analysis,  Investments,  Mathematical models,  Technological innovations,  Technology,  Diffusion of innovations