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The effect of technology and demand shocks on structural and industrial dynamics: Evidence from Austrian manufacturing

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Author Info
Werner Hölzl () (Vienna University of Economics & B.A.)
Andreas Reinstaller () (Vienna University of Economics & B.A. and MERIT - Maastricht University)

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Abstract

In this paper 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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Paper provided by Vienna University of Economics and B.A. Research Group: Growth and Employment in Europe: Sustainability and Competitiveness in its series Working Papers with number geewp37.

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Date of creation: Jun 2004
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Handle: RePEc:wiw:wiwgee:geewp37

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Web page: http://www.wu-wien.ac.at/inst/vw1/gee/

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Related research
Keywords: Industrial dynamics; structural change; technology shocks; demand shocks; entry and exit; employment;

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Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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References listed on IDEAS
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  7. Harberger, Arnold C, 1998. "A Vision of the Growth Process," American Economic Review, American Economic Association, vol. 88(1), pages 1-32, March.
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  12. Dosi, Giovanni, 1997. "Opportunities, Incentives and the Collective Patterns of Technological Change," Economic Journal, Royal Economic Society, vol. 107(444), pages 1530-47, September. [Downloadable!] (restricted)
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  14. 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. [Downloadable!] (restricted)
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  18. Werner Hölzl, 2003. "Tangible and intangible sunk costs and the entry and exit of firms in Austrian Manufacturing," Working Papers geewp33, Vienna University of Economics and B.A. Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
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    Other versions:
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