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An Uncertainty-Driven Theory of the Productivity Slowdown: Manufacturing

  • Comin, D.

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
Date of revision:
Handle: RePEc:cvs:starer:00-16
Contact details of provider: Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
Phone: (212) 998-8936
Fax: (212) 995-3932
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Order Information: Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012

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  1. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
  2. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
  3. Jorgenson, Dale W., 1966. "The Embodiment Hypothesis," Scholarly Articles 3403063, Harvard University Department of Economics.
  4. Kevin J. Stiroh & Dale W. Jorgenson, 1999. "Information Technology and Growth," American Economic Review, American Economic Association, vol. 89(2), pages 109-115, May.
  5. Dale T. Mortensen & Christopher A. Pissarides, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 397-415.
  6. Dale W. Jorgenson, 1966. "The Embodiment Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 74, pages 1.
  7. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
  8. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  9. anonymous, 1995. "Does the bouncing ball lead to economic growth?," Regional Update, Federal Reserve Bank of Atlanta, issue Jul, pages 1-2, 4-6.
  10. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  11. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
  12. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
  13. Rosenberg, Nathan, 1976. "On Technological Expectations," Economic Journal, Royal Economic Society, vol. 86(343), pages 523-35, September.
  14. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-65, December.
  15. Caroli, Eve, 2001. "New technologies, organizational change and the skill bias: what do we know?," Economics Papers from University Paris Dauphine 123456789/10054, Paris Dauphine University.
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