IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/4455.html

Diffusion Lags and Aggregate Fluctuations. New Name: Product Innovation and the Business Cycle

Author

Listed:
  • Boyan Jovanovic
  • Saul Lach

Abstract

This 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.

Suggested Citation

  • Boyan Jovanovic & Saul Lach, 1993. "Diffusion Lags and Aggregate Fluctuations. New Name: Product Innovation and the Business Cycle," NBER Working Papers 4455, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4455
    Note: EFG PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w4455.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 10(Fall), pages 9-22.
    2. Devereux, Michael B. & Head, Allen C. & Lapham, Beverly J., 1993. "Exit and Entry, Increasing Returns to Specialization, and Business Cycles," Queen's Economics Department Working Papers 273263, Queen's University - Department of Economics.
    3. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-653, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Julio J. Rotemberg & Michael Woodford, 1994. "Is the Business Cycles a Necessary Consequence of Stochastic Growth?," NBER Working Papers 4650, National Bureau of Economic Research, Inc.
    2. Cooley, Thomas F. & Dwyer, Mark, 1998. "Business cycle analysis without much theory A look at structural VARs," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 57-88.
    3. George Korres & Emmanuel Marmaras & George Tsobanoglou, 2004. "Enterpreneurship and innovation activites in the schumpeterian lines," ERSA conference papers ersa04p169, European Regional Science Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jovanovic, Boyan & Lach, Saul, 1990. "The Diffusion Of Technology And Inequality Among Nations," Working Papers 90-34, C.V. Starr Center for Applied Economics, New York University.
    2. Adnan Haider Bukhari & Safdar Ullah Khan, 2008. "A Small Open Economy DSGE Model for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 963-1008.
    3. Evans, Charles L. & Marshall, David A., 2007. "Economic determinants of the nominal treasury yield curve," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1986-2003, October.
    4. Ireland, Peter N., 2003. "Endogenous money or sticky prices?," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1623-1648, November.
    5. Patrick Mellacher, 2021. "Growth, Inequality and Declining Business Dynamism in a Unified Schumpeter Mark I + II Model," Papers 2111.09407, arXiv.org, revised Nov 2023.
    6. Blomberg, S. Brock & Hess, Gregory D., 2003. "Is the political business cycle for real?," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1091-1121, May.
    7. J.P.G. Reijnders, 2007. "Impulse or propagation? How the tides turned in Business Cycle Theory," Working Papers 07-07, Utrecht School of Economics.
    8. Valerie A. Ramey & Neville Francis, 2009. "A Century of Work and Leisure," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 189-224, July.
    9. Daan Freeman & Leon Bettendorf & Gerrit Hugo van Heuvelen & Gerdien Meijerink, 2024. "Business Dynamics and Productivity Growth in the Netherlands," CESifo Working Paper Series 11071, CESifo.
    10. Diego A. Comin & Bart Hobijn, 2009. "The CHAT Dataset," Harvard Business School Working Papers 10-035, Harvard Business School.
    11. Serban Mogos & Alex Davis & Rui Baptista, 2021. "High and sustainable growth: persistence, volatility, and survival of high growth firms," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(1), pages 135-161, March.
    12. Kuroda, Sachiko & Yamamoto, Isamu, 2008. "Estimating Frisch labor supply elasticity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 566-585, December.
    13. Andrés Felipe Martínez, 2006. "Determinantes de la supervivencia de empresas industriales en el área metropolitana de Cali 1994-2003," Ensayos Sobre Economía Regional (ESER) 2320, Banco de la República - Economía Regional.
    14. Viktoria Kocsis & Victoria Shestalova & Henry van der Wiel & Nick Zubanov & Ruslan Lukach & Bert Minne, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature," CPB Document 180.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Aubhik Khan & Julia K. Thomas, 2007. "Inventories and the Business Cycle: An Equilibrium Analysis of ( S , s ) Policies," American Economic Review, American Economic Association, vol. 97(4), pages 1165-1188, September.
    16. Patrick Fève, 1997. "Les méthodes d'étalonnage au regard de l'économétrie," Revue Économique, Programme National Persée, vol. 48(3), pages 629-638.
    17. Boyan Jovanovic, 1998. "Michael Gort's Contribution to Economics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 327-337, April.
    18. van Roye, Björn & Wesselbaum, Dennis, 2009. "Capital, endogenous separations, and the business cycle," Kiel Working Papers 1561, Kiel Institute for the World Economy.
    19. Ghosal, Vivek, 2007. "Small is Beautiful but Size Matters: The Asymmetric Impact of Uncertainty and Sunk Costs on Small and Large Businesses," MPRA Paper 5461, University Library of Munich, Germany.
    20. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky information versus sticky prices: a proposal to replace the New-Keynesian Phillips curve," Proceedings, Federal Reserve Bank of San Francisco, issue jun.

    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4455. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.