Technology shock

Technology shocks are events in a macroeconomic model, that change the production function. Usually this is modelled with an aggregate production function that has a scaling factor.

A technology shock affects an industry or firm's productivity, this may be a positive shock - increasing the output for a given set of inputs, or a negative shock - decreasing the output for a given set of inputs. Negative shocks are much less common than positive shocks as technology rarely moves backwards.

See also