UC San Diego

Technological progress is one of the main driving forces behind economic growth but how it affects the economy initially is not well understood. This dissertation contains three chapters that examine technological progress and productivity from different angles. They are all motivated by the need for better understanding the economic fluctuations that are observed in the data. Chapter 1 presents a long time-series of data, dating from 1889 to 2002, in order to examine whether technological progress can lead to temporary slowdowns in productivity growth. In this chapter, patent application data are used as a measure of technological progress. Results show that labor productivity in the pre-WWII period falls below trend temporarily after the arrival of new technology. However, this is not seen in the post-WWII period when labor productivity slowly starts to increase above trend without initial adverse effects. Chapter 2, which is co- authored with Bryan Goudie, examines the assumption that technological progress generally is assumed to be exogenous to military spending. The chapter uses firm- level data on military prime contracts together with data on sales per employed worker and patent data in order to explore the effects of military spending on productivity and the development of new technology. The study finds that the number of patents increases significantly as a result of a military prime contract shock, indicating the arrival of new technology. Chapter 3, co-authored with Bryan Goudie, follows the approach in chapter 2 but examines the effects of military prime contracts at the regional level. The chapter uses U.S. state-level data on military prime contracts, data on gross domestic product by state, and utility patents, sorted by the state of the first inventor. The analysis shows that also at the regional level, military prime contracts lead to the development of new technology. However, labor productivity at the regional level is only affected insignificantly