The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data
AbstractA basic neoclassical model of production is often used to assess the contribution of investment to output growth. In the model, investment raises the capital stock and output growth increases in proportion to the growth in capital. It has been argued, however, that computers, as a "general purpose technology," lead to process innovations and facilitate organizational coinvestments. Since there may be a learning period before firms realize the full potential of the new technology and begin to implement new processes, there may be a lag between the growth in investment and its benefits. In fact, during periods of rapid adoption of new technologies and equipment, firms may incur adjustment costs and struggle to maintain previous levels of output. Using aggregate annual Canadian data from 1961 to 2001, the author explores the magnitude of the effect that investment in new technology, in the form of new computer hardware, can have on output growth. He finds that such investment has a positive effect on output growth that cannot be explained by growth in inputs. This effect, however, is not instantaneous and is strongest only three years after the initial investment. Furthermore, the author's findings suggest that the effect of computer hardware investment has grown over time.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 04-1.
Length: 44 pages
Date of creation: 2004
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Other versions of this item:
- Danny Leung, 2004. "The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 52-61, Fall.
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O49 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-01-08 (All new papers)
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