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An Uncertainty-Driven Theory of the Productivity Slowdown: Manufacturing

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Author Info
Comin, D.

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Abstract

This paper presents a theory of the productivity slowdown based on the effects that uncertainty has on the productivity of specialized capital. Uncertainty reduces the efficiency of inflexible capital and generates a slowdown. It also increases the demand for flexible capital which retains its productivity in the new volatile environment. The increase in the share of flexible capital explains the acceleration of the rate of productivity growth embodied in new capital observed by McHugh and Lane [1987]. This fact is difficult to explain by the theories that emphasize the cost of implementing the new technologies as the cause of the slowdown. The model also highlights the positive effect that uncertainty has on the speed of diffusion of technologies, and on the rate of technological progress. These relationships are successfully tested in manufacturing and are used to explain the rapid diffusion of computers and the spectacular TFP growth rate of the computer producing sectors.

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Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 00-16.

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Length: 76 pages
Date of creation: 2000
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Handle: RePEc:cvs:starer:00-16

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Postal: C.V. Starr Center, Department of Economics, New York University, 269 Mercer Street 7th Floor, New York, NY 10003
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Postal: C.V. Starr Center, Department of Economics, New York University, 269 Mercer Street 7th Floor, New York, NY 10003
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Related research
Keywords: PRODUCTIVITY SLOWDOWN UNCERTAINTY SPECIALIZED CAPITAL FLEXIBILITY

Find related papers by JEL classification:
D2 - Microeconomics - - Production and Organizations
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
D9 - Microeconomics - - Intertemporal Choice and Growth
O3 - Economic Development, Technological Change, and Growth - - Technological Change

References listed on IDEAS
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  1. Dale W. Jorgenson & Kevin J. Stiroh, 1999. "Information Technology and Growth," American Economic Review, American Economic Association, vol. 89(2), pages 109-115, May. [Downloadable!] (restricted)
  2. Jeremy Greenwood & Boyan Jovanovic, 1998. "Accounting for Growth," NBER Working Papers 6647, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Robert Rich & Joseph Tracy, 2000. "Uncertainty and Labor Contract Durations," NBER Working Papers 7731, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 64-83, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Diego Comin, 2002. "Comments on James Bessen's "Technology Adoption Costs and Productivity Growth: The 70's as a Technology Transition"," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 470-476, April. [Downloadable!] (restricted)
  2. James Bessen, 2002. "Technology Adoption Costs and Productivity Growth: The Transition to Information Technology," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 443-469, April. [Downloadable!] (restricted)
  3. Diego Comin & Bart Hobijn, 2007. "Implementing Technology," NBER Working Papers 12886, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Jeffrey R. Campbell & Jonas D.M.Fisher, 2000. "Idiosyncratic Risk and Aggregate Employment Dynamics," NBER Working Papers 7936, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Diego Comin & Thomas Philippon, 2005. "The Rise in Firm-Level Volatility: Causes and Consequences," NBER Working Papers 11388, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Boyan Jovanovic, 2004. "Asymmetric Cycles," NBER Working Papers 10573, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Diego Comin & Sunil Mulani, 2003. "Diverging Trends in Macro and Micro Volatility: Facts," Macroeconomics 0306008, EconWPA. [Downloadable!]
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  8. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January. [Downloadable!] (restricted)
    Other versions:
  9. Matthew F. Mitchell, 2001. "Specialization and the skill premium in the 20th century," Staff Report 290, Federal Reserve Bank of Minneapolis. [Downloadable!]
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