Technological Standardization, Endogenous Productivity and Transitory Dynamics

Abstract

We would like to thank Domenico Giannone, Cédric Tille, Tim Pohlmann and Tommaso Trani for very fruitful discussions and valuable comments. We would also like to thank

Revisions in Utilization-Adjusted TFP and Robust Identification of News Shocks

“…We first consider four different measures of technological innovation: the index of information and communications technology (ICT) standards by Baron and Schmidt (2015); the index of new technology manuals by Alexopoulos (2011); real R&D expenditures per capita from the NIPAs; and the inverse of the relative price of investment price from Justiniano et al (2010). The index by Baron and Schmidt (2015) counts the number of new ICT industry standards per quarter released by standard setting organizations (SSOs) in the U.S. 34 As Baron and Schmidt (2015) argue, standardization is an essential step in the introduction and adoption of new technologies.…”

“…ISO). The standardization index by Baron and Spulber (2015) and Baron and Schmidt (2015) is based on information from the Searle Center database on technology standards and standard setting organizations. See their papers for details.…”

“…As such, standardization represents an ideal measure to assess the extent to which our max-share shock captures news. As in Baron and Schmidt (2015), we focus on ICT standards because ICT have constituted the dominant type of general purpose technology, although results are robust to using broader industry standards. Alexopoulos (2011)'s count of books published in the field of technology provides a complementary measure even though she develops her measure primarily to investigate the role of contemporaneous technology shocks.…”

“…First, the shock predicts delayed TFP growth, accounting for only a small fraction of TFP fluctuations at short forecast horizons but for 70 percent or more at longer horizons. Second, the shock is associated with large and persistent jumps in two novel measures of innovation -an index of books published in the fields of technology by Alexopoulos (2011), and an index of technological standardization by Baron and Schmidt (2015). The shock is also followed by a hump-shaped increase in R&D expenditures and a gradual decline in the relative price of investment goods.…”

News-Driven Business Cycles: Insights and Challenges

“…Moreover, Alexopoulos finds that economic activity tends to pick up after these news events, which supports the idea that such positive news creates an expansion. Baron and Schmidt (2013) propose the use of technological standardization as a novel indicator of technological change. They find that standardization is an essential mechanism for revealing news about future movements of macroeconomic aggregates, as evidenced by the positive and immediate reaction of stock market data to a technology shock.…”