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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. Francis, Neville & Ramey, Valerie A., 2005. "Is the technology-driven real business cycle hypothesis dead? Shocks and aggregate fluctuations revisited," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1379-1399, November. [Downloadable!] (restricted)
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  2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January. [Downloadable!] (restricted)
  3. 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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  4. Sims, Christopher A, 2002. "Solving Linear Rational Expectations Models," Computational Economics, Springer, vol. 20(1-2), pages 1-20, October. [Downloadable!]
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  5. 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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  6. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 397-415, July. [Downloadable!] (restricted)
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  7. Merz, Monika, 1999. "Heterogeneous job-matches and the cyclical behavior of labor turnover," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 91-124, February. [Downloadable!] (restricted)
  8. Dale T. Mortensen & Christopher A. Pissarides, 1998. "Technological Progress, Job Creation and Job Destruction," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 733-753, October. [Downloadable!] (restricted)
  9. BOUCEKKINE, Raouf & DE LA CROIX, David & LICANDRO, Omar, 2006. "Vintage capital," CORE Discussion Papers 2006024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
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  10. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March. [Downloadable!] (restricted)
  11. Caballero, Ricardo J & Hammour, Mohamad L, 1996. "On the Timing and Efficiency of Creative Destruction," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 805-52, August. [Downloadable!] (restricted)
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Cited by:
(explanations, 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. Fabio Canova & David Lopez-Salido & Claudio Michelacci, 2006. "Schumpeterian Technology Shocks," Economics Working Papers 1012, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2007. [Downloadable!]
  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!]
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  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," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2004031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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  5. Canova, Fabio & Lopez-Salido, Jose David & Michelacci, Claudio, 2007. "The Labour Market Effects of Technology Shocks," CEPR Discussion Papers 6365, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. 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!]
    Other versions:
  7. 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!]
    Other versions:
  8. Federico S. Mandelman & Francesco Zanetti, 2008. "Technology shocks, employment, and labor market frictions," Working Paper 2008-10, Federal Reserve Bank of Atlanta. [Downloadable!]
  9. Renato Faccini & Salvador Ortigueira, 2008. "Labor-Market Volatility in the Search-and-Matching Model: The Role of Investment-Specific Technology Shocks," Economics Working Papers ECO2008/39, European University Institute. [Downloadable!]
  10. Domenico J. Marchetti & Francesco Nucci, 2004. "Pricing behavior and the comovement of productivity and labor: evidence from firm-level data," Temi di discussione (Economic working papers) 524, Bank of Italy, Economic Research Department. [Downloadable!]
  11. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L, 2005. "The Replacement Problem in Frictional Economies: An 'Equivalence Result'," CEPR Discussion Papers 5026, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  12. Regis Barnichon, 2009. "Demand-driven job separation: reconciling search models with the ins and outs of unemployment," Finance and Economics Discussion Series 2009-24, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  13. 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!]
  14. Juha Kilponen & Juuso Vanhala, 2009. "Productivity and Job Flows - Heterogeneity of New Hires and Continuing Jobs in the Business Cycle," Working Paper Series 1080, European Central Bank. [Downloadable!]
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  15. Régis Barnichon, 2007. "Productivity, Aggregate Demand and Unemployment Fluctuations," CEP Discussion Papers dp0819, Centre for Economic Performance, LSE. [Downloadable!]
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  16. 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!]
    Other versions:
  17. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2005. "The replacement problem in frictional economies : a near equivalence result," Working Paper 05-01, Federal Reserve Bank of Richmond. [Downloadable!]
    Other versions:
  18. Canova, Fabio & López-Salido, J David & Michelacci, Claudio, 2008. "The Effects of Technology Shocks on Hours and Output: A Robustness Analysis," CEPR Discussion Papers 6720, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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This page was last updated on 2009-11-22.

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