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Technology Shocks and Job Flows

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Author Info
CLAUDIO MICHELACCI
DAVID LOPEZ-SALIDO

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Abstract

We consider a version of the Solow growth model where technological progress can be investment specific or investment neutral. The labour market is subject to search frictions, and the existing productive units may fail to adopt the most recent technological advances. Technological progress can lead to the destruction of technologically obsolete jobs and cause unemployment. We calibrate the model to replicate the high persistence that characterizes the dynamics of firms' neutral technology and the frequency of firms' capital adjustment. We find that neutral technological advances increase job destruction and job reallocation and reduce aggregate employment. Investment-specific technological advances reduce job destruction, have mild effects on job creation, and are expansionary. Hence, neutral technological progress prompts Schumpeterian creative destruction, while investment-specific technological progress operates essentially as in the standard neoclassical growth model. Using structural VAR models, we provide support to the key dynamic implications of the model. Copyright 2007 The Review of Economic Studies Limited.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-937X.2007.00452.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 74 (2007)
Issue (Month): 4 (October)
Pages: 1195-1227
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Handle: RePEc:bla:restud:v:74:y:2007:i:4:p:1195-1227

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Aghion, Philippe & Howitt, Peter, 1994. "Growth and Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 477-94, July. [Downloadable!] (restricted)
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  2. Ahituv, Avner & Zeira, Joseph, 2000. "Technical Progress and Early Retirement," CEPR Discussion Papers 2614, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March. [Downloadable!] (restricted)
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  1. Fabio Canova & David Lopez-Salido & Claudio Michelacci, 2006. "The Labor Market Effects of Technology Shocks," Economics Working Papers 1012, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2007. [Downloadable!]
    Other versions:
  2. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2006. "Technology-policy interaction in frictional labor markets," Working Paper 06-10, Federal Reserve Bank of Richmond. [Downloadable!]
    Other versions:
  3. Philippe Azkenazy & Eva Moreno, 2004. "The impact of technological and organizational changes on labor flows. Evidence on French establishments," DELTA Working Papers 2004-25, DELTA (Ecole normale supérieure). [Downloadable!]
  4. Philippe, ASKENAZY & Eva, MORENO-GALBIS, 2004. "The impact of technological and organizatioanl changes on labor flows. Evidence on French establishments," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2004031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  5. Morten O. Ravn & Saverio Simonelli, 2007. "Labor Market Dynamics and the Business Cycle: Structural Evidence for the United States," Economics Working Papers ECO2007/13, European University Institute. [Downloadable!]
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  6. Javier Díaz-Giménez & Josep Pijoan-Mas, 2006. "Flat Tax Reforms In The U.S.: A Boon For The Income Poor," Working Papers wp2006_0611, CEMFI. [Downloadable!]
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  7. Federico S. Mandelman & Francesco Zanetti, 2008. "Technology shocks, employment, and labor market frictions," Working Paper 2008-10, Federal Reserve Bank of Atlanta. [Downloadable!]
  8. Burcu Eyigungor, 2008. "Specific capital and vintage effects on the dynamics of unemployment and vacancies," Working Papers 08-6, Federal Reserve Bank of Philadelphia. [Downloadable!]
  9. Régis Barnichon, 2007. "Productivity, Aggregate Demand and Unemployment Fluctuations," CEP Discussion Papers dp0819, Centre for Economic Performance, LSE. [Downloadable!]
  10. Michael U. Krause & David J. Lopez-Salido & Thomas Lubik, 2007. "Do Search Frictions Matter for Inflation Dynamics?," Kiel Working Papers 1353, Kiel Institute for the World Economy. [Downloadable!]
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