The paper examines whether technology improvements have contractionary effects on economic activity. The authors construct a measure of aggregate technology change, controlling for varying utilization of capital and labor, non-constant returns, imperfect competition, and aggregation effects. They find that when technology improves, input use and non-residential investment fall sharply, while output changes little. With a lag of several years, inputs and investment return to normal levels, and output rises strongly. The results are consistent with sticky-price models, where technology improvements initially reduce input demand and output, but over time, prices adjust, leading to an increase in output. Standard one-sector real-business-cycle models, which predict expansionary effects of technology improvements, are not consistent with these findings. The authors discuss the implications of their results for modeling business cycles and conclude that technology improvements are contractionary on impact.The paper examines whether technology improvements have contractionary effects on economic activity. The authors construct a measure of aggregate technology change, controlling for varying utilization of capital and labor, non-constant returns, imperfect competition, and aggregation effects. They find that when technology improves, input use and non-residential investment fall sharply, while output changes little. With a lag of several years, inputs and investment return to normal levels, and output rises strongly. The results are consistent with sticky-price models, where technology improvements initially reduce input demand and output, but over time, prices adjust, leading to an increase in output. Standard one-sector real-business-cycle models, which predict expansionary effects of technology improvements, are not consistent with these findings. The authors discuss the implications of their results for modeling business cycles and conclude that technology improvements are contractionary on impact.