Technology Adoption, Turbulence and the Dynamics of Unemployment

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Technology Adoption, Turbulence and the Dynamics of Unemployment

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Georg Duernecker

Abstract

The divergence of unemployment rates between the U.S. and Europe coincided with a substantial acceleration in capital-embodied technical change in the late 70’s. Furthermore, evidence suggests that European economies have been lagging behind the U.S. in the adoption and usage of new technologies. This paper argues that the pace of technology adoption plays a fundamental role for how an economy’s labor market reacts to an acceleration in capital-embodied growth. The framework proposed offers an appealing and novel explanation for the divergence of unemployment rates across economies that are hit by the very same shock (i.e. the acceleration in embodied technical change) but differ in their technology adoption behavior. Moreover, we challenge the conventional wisdom that high European unemployment is the result of institutional rigidities by claiming that institutions are not the principal cause per se but they rather amplify certain forces that promote the emergence of high unemployment.

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Paper provided by European University Institute in its series Economics Working Papers with number ECO2008/10.

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Date of creation: 2008
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Handle: RePEc:eui:euiwps:eco2008/10

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Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-02-09 (All new papers)
NEP-DGE-2008-02-09 (Dynamic General Equilibrium)
NEP-LAB-2008-02-09 (Labour Economics)

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