Are Technology Improvements Contractionary?

@article{Basu1998AreTI,
  title={Are Technology Improvements Contractionary?},
  author={S. Basu and J. Fernald and Miles S. Kimball},
  journal={Macroeconomics eJournal},
  year={1998}
}
Yes. We construct a measure of aggregate technology change, controlling for imperfect competition, varying utilization of capital and labor, and aggregation effects. On impact, when technology improves, input use falls sharply, and output may fall slightly. With a lag of several years, inputs return to normal and output rises strongly. We discuss what models could be consistent with this evidence. For example, standard one-sector real-business-cycle models are not, since they generally predict… Expand
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