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Creative Destruction with On-the-Job Search

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  • Jean-Baptiste Michau

    (Ecole Polytechnique)

Abstract

This paper studies the consequences of creative destruction on unemployment in a frictional labor market with on-the-job search. For a benchmark calibration, a 1% increase in growth raises the unemployment rate by 1.72 percentage points in the economy without on-the-job search and by only 0.07 percentage points with on-the-job search. Rather than contributing to unemployment through more frequent job separations, in the presence of on-the-job search, creative destruction induces a direct reallocation of workers from low to high productivity jobs. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2012.10.011
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 16 (2013)
Issue (Month): 4 (October)
Pages: 691-707

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Handle: RePEc:red:issued:11-119

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Related research

Keywords: Creative destruction; Obsolescence; On-the-job search; Unemployment;

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References

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  1. Henry G. Overman & Patricia Rice & Anthony J. Venables, 2007. "Economic linkages across space," LSE Research Online Documents on Economics 19705, London School of Economics and Political Science, LSE Library.
  2. 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.
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  4. Christos Genakos & Tommaso Valletti, 2011. "Testing The “Waterbed” Effect In Mobile Telephony," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1114-1142, December.
  5. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2007. "Technology—Policy Interaction in Frictional Labour-Markets," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1089-1124.
  6. Langot, François & Moreno-Galbis, Eva, 2008. "Does the Growth Process Discriminate against Older Workers?," IZA Discussion Papers 3841, Institute for the Study of Labor (IZA).
  7. Ricardo J. Caballero & Mohamad L. Hammour, 1994. "On the Timing and Efficiency of Creative Destruction," NBER Working Papers 4768, National Bureau of Economic Research, Inc.
  8. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  9. Ricardo J. Caballero, 2007. "Specificity and the Macroeconomics of Restructuring," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033623, December.
  10. Shimer, Robert, 2006. "On-the-job search and strategic bargaining," European Economic Review, Elsevier, vol. 50(4), pages 811-830, May.
  11. Jean-Baptiste Michau, 2007. "Creative destruction with on-the-job search," LSE Research Online Documents on Economics 19658, London School of Economics and Political Science, LSE Library.
  12. Yashiv, Eran, 2006. "U.S. Labor Market Dynamics Revisited," IZA Discussion Papers 2455, Institute for the Study of Labor (IZA).
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  16. Fabien Postel-Vinay, 2002. "The Dynamics of Technological Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 737-760, August.
  17. Martine Carre & David Drouot, 2004. "Pace versus Type: The Effect of Economic Growth on Unemployment and Wage Patterns," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 737-757, July.
  18. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
  19. 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.
  20. Christopher A. Pissarides & Giovanna Vallanti, 2007. "The Impact Of Tfp Growth On Steady-State Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 607-640, 05.
  21. Hiroaki Miyamoto & Yuya Takahashi, 2008. "Productivity Growth, On-the-Job Search, and Unemployment," Working Papers EMS_2011_06, Research Institute, International University of Japan, revised Feb 2011.
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Cited by:
  1. Jean-Baptiste Michau, 2007. "Creative destruction with on-the-job search," LSE Research Online Documents on Economics 19658, London School of Economics and Political Science, LSE Library.
  2. Miyamoto, Hiroaki & Takahashi, Yuya, 2011. "Productivity growth, on-the-job search, and unemployment," Journal of Monetary Economics, Elsevier, vol. 58(6), pages 666-680.
  3. Hyatt, Henry R. & Spletzer, James R., 2013. "The Recent Decline in Employment Dynamics," IZA Discussion Papers 7231, Institute for the Study of Labor (IZA).
  4. Jean-Baptiste Michau, 2009. "Unemployment Insurance and Cultural Transmission: Theory and Application to European Unemployment," CEP Discussion Papers dp0936, Centre for Economic Performance, LSE.

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