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Julia Schmidt

Graduate Institute of International and Development Studies (IHEID), Geneva, Switzerland

Authors: Justus Baron and Julia Schmidt

Abstract: We propose the use of technological standardization as a novel indicator of technological change. Standardization is an important feature of technological progress in many industries and triggers the adoption of new or drastically improved technologies. Our new indicator allows us to identify technology shocks and analyze their impact on the cycle, but also enables us to investigate the cyclical nature of technology adoption. First, our results suggest that not only inventive activity, but more importantly the actual adoption of new technologies is endogenous to the cycle. Technology is thus not a purely exogenous phenomenon. Second, the identified technology shock diffuses slowly and the positive reaction of output and investment is S-shaped as is typical of technological diffusion. Before picking up permanently, total factor productivity temporarily decreases as the newly adopted technology is incompatible with installed physical, human and organizational capital. Third, we find that standardization is an essential mechanism for anchoring expectations about future movements of macroeconomic aggregates as evidenced by the positive and immediate reaction of stock market data to a technology shock.

Keywords: technology adoption, business cycle dynamics, standards, aggregate productivity, Bayesian vector autoregressions

Full Text: “Technological Standardization, Endogenous Productivity and Transitory Dynamics”