Journal Article

Asymmetric Cycles

Boyan Jovanovic

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 73, issue 1, pages 145-162
Published in print January 2006 | ISSN: 0034-6527
Published online January 2006 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2006.00372.x
Asymmetric Cycles

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  • Technological Change; Research and Development
  • Macroeconomics: Consumption, Saving, Production, Employment, and Investment
  • Prices, Business Fluctuations, and Cycles
  • Economic Growth and Aggregate Productivity

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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.

Keywords: E23; E32; O33; O47

Journal Article.  5943 words.  Illustrated.

Subjects: Technological Change; Research and Development ; Macroeconomics: Consumption, Saving, Production, Employment, and Investment ; Prices, Business Fluctuations, and Cycles ; Economic Growth and Aggregate Productivity

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