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Technology shocks, employment and labour market frictions

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  • Mandelman, Federico S

    ()
    (Federal Reserve Bank of Atlanta)

  • Zanetti, Francesco

    ()
    (Bank of England)

Abstract

Recent empirical evidence suggests that a positive technology shock leads to a decline in labour inputs. However, the standard real business model fails to account for this empirical regularity. Can the presence of labour market frictions address this problem, without otherwise altering the functioning of the model? We develop and estimate a real business cycle model using Bayesian techniques that allows, but does not require, labour market frictions to generate a negative response of employment to a technology shock. The results of the estimation support the hypothesis that labour market frictions are the factor responsible for the negative response of employment.

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Paper provided by Bank of England in its series Bank of England working papers with number 390.

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Length: 29 pages
Date of creation: 03 Jun 2010
Date of revision:
Handle: RePEc:boe:boeewp:0390

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Keywords: Technology shocks; employment; labour market frictions;

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Cited by:
  1. Nooman Rebei, 2012. "What (Really) Accounts for the Fall in Hours After a Technology Shock?," IMF Working Papers 12/211, International Monetary Fund.
  2. Bonev, Pavlin, 2013. "Government Intervention in Postsecondary Education in Bulgaria," MPRA Paper 52669, University Library of Munich, Germany.
  3. Auray, Stephane & de Blas, Beatriz, 2011. "Investment, Matching and Persistence in a modified Cash-in-Advance Economy," Working Papers in Economic Theory 2011/10, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).

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