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The effects of technological innovations on employment : a new explanation

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Abstract

This paper investigates principally the effects of a technological innovation on hours worked in a sticky price model. Our challenge is to reproduce the short-run decline in employment supported by a large range of recent works, inspired by Gali (1999), regardless of any monetary policy consideration. The model simulations concern the post war U.S. economy under two different monetary policies : an exogenous rule targeting money supply and a simple Taylor rule. The most interesting result is that the introduction of an input-output production structure counterbalances the full-accommodation of a technological innovation when monetary policy is governed by a Taylor rule, by (i) providing the model with more price rigidities ; (ii) inducing a substitution effect between intermediate goods and labor input for plausible values of intermediate inputs share.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2005/V05013.pdf
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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v05013.

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Length: 44 pages
Date of creation: Feb 2005
Date of revision:
Handle: RePEc:mse:wpsorb:v05013

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Keywords: Technology shocks; sticky prices; labor; intermediate inputs; Taylor rule; exogenous monetary policy.;

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