Diffusion Lags and Aggregate Fluctuations. New Name: Product Innovation and the Business Cycle
AbstractThis paper studies how random product innovations affect the time series properties of aggregates. It posits that recurring inventions of new intermediate goods differ in quality, and that their usage spreads gradually through the economy. It examines how fluctuations in per capita GNP are affected by these features of the innovation process. Micro data from the U.S. show, first, that the dispersion of products' qualities is quite large: Its coefficient of variation is 0.56. More importantly, they also show that the rate of diffusion of new products is relatively slow; Only 4.3% of the potential market size is realized in every year. Because diffusion is so slow, the model explains only low frequency movements in per capita GNP in the G-7 countries.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4455.
Date of creation: Sep 1993
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Find related papers by JEL classification:
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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.:
- Michael B. Devereux & Allen C. Head & Beverly J. Lapham, 1993. "Exit and Entry, Increasing Returns to Specialization, and Business Cycles," Working Papers 871, Queen's University, Department of Economics.
- Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
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