Yes. We construct a measure of aggregate technology change, controlling for varying
utilization of capital and labor, non-constant returns and imperfect competition, and aggregation effects.
On impact, when technology improves, input use and non-residential investment fall sharply. Output
changes little. With a lag of several years, inputs and investment return to normal and output rises
strongly. We discuss what models could be consistent with this evidence. For example, standard onesector
real-business-cycle models are not, since they generally predict that technology improvements are
expansionary, with inputs and (especially) output rising immediately. However, the evidence is
consistent with simple sticky-price models, which predict the results we find: When technology improves,
input use and investment demand generally fall in the short run, and output itself may also fall.