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Asymmetric Cycles

  • Boyan Jovanovic

I estimate a model in which new technology entails random adjustment needs. Rapid adjustments may cause measured productivity to decline. The slow-downs persist because adjustment is costly, and hence protracted. The model explains both the “steepness” and the “deepness” asymmetry of cycles. Adjustment costs amount to about 14% of output and technological inefficiency to about 28%. Firms abandon technologies long before they are perfected—current practice total factor productivity (TFP) is 20% below its maximal level. Copyright 2006, Wiley-Blackwell.

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File URL: http://hdl.handle.net/10.1111/j.1467-937X.2006.00372.x
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Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 73 (2006)
Issue (Month): 1 ()
Pages: 145-162

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Handle: RePEc:oup:restud:v:73:y:2006:i:1:p:145-162
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