Working Paper Series,
Uppsala University, Department of Economics

Abstract: Empirical evidence on the relationship between technology shocks and e.g. hours worked hinges crucially on the identification of the unobservable technological progress. In this paper, we study different measures of technology in order to find out (i) to what extent they capture the same underlying phenomenon and (ii) whether the implications for macroeconomic theory are robust across the approaches. Several versions of the productions function approach and structural VAR models are investigated. Our main finding is that the different technology measures are highly correlated. However, the exact formulation of the identifying restrictions seems to matter for the results. While we replicate the standard finding of a strongly procyclical Solow residual, all other measures of technology are either acyclical or countercyclical.

Keywords: Technology shocks; productions function approach; strcture VAR models

JEL-codes: C32; E32

38 pages, First version: May 7, 2002. Revised: March 2, 2006.

Note: Revised version of the second half of the paper.

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wp2002_10r.pdf  Revised Working paper

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Published as

Annika Alexius and Mikael Carlsson, (2005), 'Measures of Technology and the Business Cycle', Review of Economics and Statistics, vol 87, no 2, pages 299-307

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