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Technology Shocks and the Labor-Input Response: Evidence from Firm-Level Data

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  • Carlsson, Mikael

    ()
    (Research Department, Central Bank of Sweden)

  • Smedsaas, Jon

    (Department of Economics)

Abstract

We study the relationship between technology shocks and labor input on Swedish firm-level data using a production function approach to identify technology shocks. Taking standard steps yields a contractionary contemporaneous labor-input response in line with previous studies. This finding may, however, be driven by measurement errors in the labor-input variable. Relying on a unique feature of our data set, which contains two independently measured firm-specific labor input measures, we can evaluate the potential bias. We do not find any evidence supporting that this bias would conceal any true positive contemporaneous effect. The results thus point away from standard flexible-price models and towards models emphasizing firm-level rigidities.

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Bibliographic Info

Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 198.

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Length: 26 pages
Date of creation: 01 May 2006
Date of revision:
Handle: RePEc:hhs:rbnkwp:0198

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Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Phone: 08 - 787 00 00
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Web page: http://www.riksbank.com/
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Keywords: Technology Shocks; Labor Input; Business Fluctuations; Micro Data;

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References

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  1. Ramey, Valerie A & Francis, Neville, 2002. "Is The Technology-Driven Real Business Cycle Hypothesis Dead? Shocks and Aggregate Fluctuations Revisted," University of California at San Diego, Economics Working Paper Series, Department of Economics, UC San Diego qt6x80k3nx, Department of Economics, UC San Diego.
  2. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 546, Board of Governors of the Federal Reserve System (U.S.).
  3. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 11(4), pages 343-61, July-Aug..
  4. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What Happens After a Technology Shock?," NBER Working Papers 9819, National Bureau of Economic Research, Inc.
  5. John G. Fernald, 2005. "Trend breaks, long-run restrictions, and the contractionary effects of technology improvements," Working Paper Series, Federal Reserve Bank of San Francisco 2005-21, Federal Reserve Bank of San Francisco.
  6. Susanto Basu & John Fernald & Miles Kimball, 2004. "Are Technology Improvements Contractionary?," NBER Working Papers 10592, National Bureau of Economic Research, Inc.
  7. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
  8. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, American Economic Association, vol. 89(1), pages 249-271, March.
  9. Mikael Carlsson, 2003. "Measures of Technology and the Short-run Response to Technology Shocks," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 105(4), pages 555-579, December.
  10. Michael Dotsey, 2002. "Structure from shocks," Economic Quarterly, Federal Reserve Bank of Richmond, Federal Reserve Bank of Richmond, issue Fall, pages 37-47.
  11. Annika Alexius & Mikael Carlsson, 2005. "Measures of Technology and the Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 299-307, May.
  12. Marchetti, Domenico J. & Nucci, Francesco, 2005. "Price stickiness and the contractionary effect of technology shocks," European Economic Review, Elsevier, Elsevier, vol. 49(5), pages 1137-1163, July.
  13. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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Cited by:
  1. Francesco Furlanetto & Martin Seneca, 2007. "Rule-of-thumb consumers, productivity and hours," Working Paper, Norges Bank 2007/05, Norges Bank.
  2. Carlsson, Mikael & Messin, Julián & Nordström Skans, Oskar, 2011. "Wage adjustment and productivity shocks," Working Paper Series, Center for Labor Studies, Uppsala University, Department of Economics 2011:14, Uppsala University, Department of Economics.
  3. Fuss, Catherine & Wintr, Ladislav, 2009. "Rigid labour compensation and flexible employment? Firm-level evidence with regard to productivity for Belgium," Working Paper Series, European Central Bank 1021, European Central Bank.
  4. KWON Hyeog Ug & Jun-Hyung KO, 2013. "Do Technology Shocks Lower Hours Worked? Evidence from the Japan Industrial Productivity Database," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 13018, Research Institute of Economy, Trade and Industry (RIETI).
  5. Beate Schirwitz, 2013. "Business Fluctuations, Job Flows and Trade Unions - Dynamics in the Economy," ifo Beiträge zur Wirtschaftsforschung, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, number 47, 8.
  6. Stadin, Karolina, 2012. "Vacancy Matching and Labor Market Conditions," Working Paper Series, Uppsala University, Department of Economics 2012:16, Uppsala University, Department of Economics.

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