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

  • Hölzl Werner
  • Reinstaller Andreas


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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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
Date of revision:
Handle: RePEc:unm:umamer:2004015
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  1. Metcalfe, John S. & Foster, John & Ramlogan, Ronnie, 2003. "Adaptive Economic Growth," Centre on Regulation and Competition (CRC) Working papers 30637, University of Manchester, Institute for Development Policy and Management (IDPM).
  2. 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.
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  4. Michael Peneder, 1999. "The Austrian Paradox: "Old" Structures but High Performance?," Austrian Economic Quarterly, WIFO, vol. 4(4), pages 239-247, October.
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  12. 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.
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  14. Mowery, David & Rosenberg, Nathan, 1993. "The influence of market demand upon innovation: A critical review of some recent empirical studies," Research Policy, Elsevier, vol. 22(2), pages 107-108, April.
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  16. Steven Klepper, 2002. "Firm Survival and the Evolution of Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 37-61, Spring.
  17. 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.
  18. Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320.
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  20. repec:cup:cbooks:9780521432825 is not listed on IDEAS
  21. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-23, December.
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