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Uneven technical process and job destructions

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  • Cohen, Daniel
  • Saint-Paul, Gilles

Abstract

We develop a two-sector model in which technological progress alternatively raises the productivity of one sector after another. We assume that goods are complements for the final consumers. The sector which benefits from technical progress will see a resulting fall in its price . In this model, any uneven technical progress leads to job destruction in the sector which benefits from it, and job creation in the least productive sector. We examine the pattern of wages and unemployment that follow shocks (symmetric or asymmetric) which can occur in the economy. We show that wages will immediately rise and overshoot their long-run target: as time passes they must fall, as will the degree of tightness in the labour market (and sometimes unemployment). An `age of diminished expectations' following any productivity shock is then likely to occur sooner or later.

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Bibliographic Info

Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Couverture Orange) with number 9412.

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Length: 25 pages
Date of creation: 1994
Date of revision:
Handle: RePEc:cpm:cepmap:9412

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Cited by:
  1. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L, 2005. "The Replacement Problem in Frictional Economies: An 'Equivalence Result'," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5026, C.E.P.R. Discussion Papers.
  2. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2005. "The Replacement Problem In Frictional Economies: A Near-Equivalence Result," Journal of the European Economic Association, MIT Press, MIT Press, vol. 3(5), pages 1007-1057, 09.
  3. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2007. "Technology—Policy Interaction in Frictional Labour-Markets," Review of Economic Studies, Oxford University Press, Oxford University Press, vol. 74(4), pages 1089-1124.
  4. Gilles Saint Paul, 1996. "Employment protection, international specialization and innovation," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 256, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1997.
  5. Gersbach, Hans & Schniewind, Achim, 2002. "Uneven Technical Progress and Unemployment," IZA Discussion Papers 478, Institute for the Study of Labor (IZA).
  6. Ramser, Hans Jürgen, 1995. "Arbeitslosigkeit und Wirtschaftswachstum," Discussion Papers, Series 1, University of Konstanz, Department of Economics 278, University of Konstanz, Department of Economics.
  7. Forslund, Anders & Lindh, Thomas, 2004. "Decentralisation of bargaining and manufacturing employment: Sweden 1970-96," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2004:3, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  8. Treier, Volker, 1999. "Unemployment in reforming countries: Causes, fiscal impacts and the success of transformation," BERG Working Paper Series, Bamberg University, Bamberg Economic Research Group 29, Bamberg University, Bamberg Economic Research Group.

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