Read All About it: What happens following a technology shock

For decades economists have searched for the sources of business cycle fluctuations. Early business cycle research focused on leading and lagging indicators and, while many of these are still employed today, they fail to provide insight into the sources of the fluctuations. Despite recent advances in economic modeling, there is still much debate as to the cause of recessions and expansions. In standard real business cycle models, a large component of the fluctuations is attributable to technology shocks. Unfortunately, technology and technology shocks are notoriously difficult to measure. To identify the responses of the economy to a technology shock, I use new data from Bowker’s Publications that documents the change in the number of new titles in technology that were available for purchase in the American economy from major publishers. My findings indicate that, in response to a positive technology shock, employment, total factor productivity and capital all significantly increase. Although my findings are different from those in other recent studies, they are consistent with the predictions of standard real business cycle models.