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The Impact of technology and demand shocks on structural dynamics: evidence from Austrian manufacturing

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  • Hölzl,Werner
  • Reinstaller,Andreas

    (MERIT)

Abstract

This paper examines the link between structural change between and within industries. We analyse the influence of sector specific developments in productivity and demand on net entry and employment in 19 industrial sectors of the Austrian economy. Based on the model of structural dynamics of Pasinetti, we develop an identification scheme that allows us to extract technology and demand shocks, by means of a structural vector autoregressive (SVAR) model with long-run restrictions. We study the patterns of productivity and demand shocks across industries by means of a principal components analysis and find that sectoral and macro-economic developments in demand strongly correlate, while this is not the case for technology shocks. Impulse-response analysis shows that for almost all sectors productivity growth rates experience an immediate increase to positive technology shocks while the hours worked decline as conjectured by Pasinetti. Finally, we use the identified shocks as explanatory variables in time- series cross section regressions on net-entry and employment data. Both types of shocks are able to explain dynamics on the industry level in terms of employment and sales but not firm dynamics.

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Bibliographic Info

Paper provided by Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT) in its series Research Memorandum with number 015.

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Date of creation: 2004
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Handle: RePEc:unm:umamer:2004015

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Keywords: microeconomics ;

References

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  1. Gunther Tichy, 2000. "The Innovation Potential and Thematic Leadership of Austrian Industries: An Interpretation of the Technology Delphi with Regard to the Old Structures/High-performance Paradox," Empirica, Springer, vol. 27(4), pages 411-436, December.
  2. Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320.
  3. J. Stan Metcalfe & John Foster & Ronnie Ramlogan, 2006. "Adaptive economic growth," Cambridge Journal of Economics, Oxford University Press, vol. 30(1), pages 7-32, January.
  4. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Business Cycles and the Relationship Between Concentration and Price-Cost Margins," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 1-17, Spring.
  5. Esben Sloth Andersen, 1998. "Escaping Satiation in an Evolutionary Model of Structural Economic Dynamics," DRUID Working Papers 98-9, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  6. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-23, December.
  7. Montobbio, Fabio, 2002. "An evolutionary model of industrial growth and structural change," Structural Change and Economic Dynamics, Elsevier, vol. 13(4), pages 387-414, December.
  8. Malerba, Franco, 2002. "Sectoral systems of innovation and production," Research Policy, Elsevier, vol. 31(2), pages 247-264, February.
  9. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Sectoral Solow residuals," Working Paper Series, Macroeconomic Issues 95-15, Federal Reserve Bank of Chicago.
  10. Peneder, Michael, 2003. "Industrial structure and aggregate growth," Structural Change and Economic Dynamics, Elsevier, vol. 14(4), pages 427-448, December.
  11. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
  12. Harry Bloch & Michael Olive, 2001. "Pricing over the Cycle," Review of Industrial Organization, Springer, vol. 19(1), pages 99-108, August.
  13. Charles L. Evans, 1991. "Productivity shocks and real business cycles," Working Paper Series, Macroeconomic Issues 91-22, Federal Reserve Bank of Chicago.
  14. Steven Klepper, 2002. "Firm Survival and the Evolution of Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 37-61, Spring.
  15. Dosi, Giovanni, 1997. "Opportunities, Incentives and the Collective Patterns of Technological Change," Economic Journal, Royal Economic Society, vol. 107(444), pages 1530-47, September.
  16. Boyan Jovanovic & Glenn MacDonald, 1993. "The Life-Cycle of a Competitive Industry," NBER Working Papers 4441, National Bureau of Economic Research, Inc.
  17. Mowery, David & Rosenberg, Nathan, 1979. "The influence of market demand upon innovation: a critical review of some recent empirical studies," Research Policy, Elsevier, vol. 8(2), pages 102-153, April.
  18. Pasinetti,Luigi, 1993. "Structural Economic Dynamics," Cambridge Books, Cambridge University Press, number 9780521432825.
  19. Jesus Felipe & Franklin M. Fisher, 2003. "Aggregation in Production Functions: What Applied Economists should Know," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 208-262, 05.
  20. Harberger, Arnold C, 1998. "A Vision of the Growth Process," American Economic Review, American Economic Association, vol. 88(1), pages 1-32, March.
  21. Neville Francis & Valerie A. Ramey, 2002. "Is the Technology-Driven Real Business Cycle Hypothesis Dead?," NBER Working Papers 8726, National Bureau of Economic Research, Inc.
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Cited by:
  1. Kim, Sangho & Lim, Hyunjoon & Park, Donghyun, 2010. "Productivity and Employment in a Developing Country: Some Evidence from Korea," World Development, Elsevier, vol. 38(4), pages 514-522, April.

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