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Productivity shocks and the unemployment rate

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Author Info
Bharat Trehan
Abstract

Productivity grew noticeably faster than usual in the late 1990s, while the unemployment rate fell to levels not seen for more than three decades. This inverse relationship between the two variables also can be seen on several other occasions in the postwar period and leads one to wonder whether there is a causal link between them. This paper focuses on technological change as the common factor, first reviewing some recent research on the effect of technological change on the unemployment rate and then presenting some empirical evidence on the issue. While theoretical models make conflicting predictions about the effects of a technology shock on the unemployment rate, the empirical evidence presented here shows that a positive technology shock leads to a reduction in the unemployment rate that persists for several years.

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Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (2003)
Issue (Month): ()
Pages: 13-27
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Handle: RePEc:fip:fedfer:y:2003:p:13-27

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Related research
Keywords: Productivity ; Unemployment;

References listed on IDEAS
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.:

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    Other versions:
  5. Laurence Ball & Robert Moffitt, 2001. "Productivity Growth and the Phillips Curve," Economics Working Paper Archive 450, The Johns Hopkins University,Department of Economics.
    Other versions:
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  9. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, vol. 89(1), pages 249-271, March. [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. Bruce A. Conway & Klaus Reiner Schenk-Hoppé, 2004. "(Un)anticipated Technological Change in an Endogenous Growth Model," Discussion Papers 04-08, University of Copenhagen. Department of Economics. [Downloadable!]
  2. Thomas B. King, 2005. "Labor productivity and job-market flows: trends, cycles, and correlations," Supervisory Policy Analysis Working Papers 2005-04, Federal Reserve Bank of St. Louis. [Downloadable!]
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