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ICT as Technical Change in the Matching and Production Functions of a Pissarides-Dixit-Stiglitz model

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  • Ziesemer,Thomas

    (MERIT)

Abstract

In this paper we integrate two workhorse models in economics: The monopolistic competition model of Dixit and Stiglitz and the search unemployment model of Pissarides. Information and communication technology (ICT) is interpreted as i) technical progress in the matching function of the Pissarides labour market search model where it is increasing the probability of filling a vacancy, and ii) as technical change in the production function of the Dixit-Stiglitz goods market model where it is increasing fixed costs and decreasing variable costs. All effects together, modelled as a permanent once-and-for-all ICT shock, increase the vacancy/ unemployment ratio, decrease the long-run equilibrium unemployment rate, and increase wages.

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Paper provided by Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT) in its series Research Memorandum with number 024.

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Date of creation: 2001
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Handle: RePEc:unm:umamer:2001024

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Keywords: economics of technology ;

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  1. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  2. David H. Autor, 2001. "Wiring the Labor Market," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 25-40, Winter.
  3. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  4. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Organizational Design and Technology Choice under Intrafirm Bargaining," American Economic Review, American Economic Association, vol. 86(1), pages 195-222, March.
  5. Addison, John T. & Portugal, Pedro, 2001. "Job Search Methods and Outcomes," IZA Discussion Papers 349, Institute for the Study of Labor (IZA).
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  7. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  8. Barras, Richard, 1990. "Interactive innovation in financial and business services: The vanguard of the service revolution," Research Policy, Elsevier, vol. 19(3), pages 215-237, June.
  9. Coles, Melvyn G & Smith, Eric, 1994. "Cross-Section Estimation of the Matching Function: Evidence from England and Wales," CEPR Discussion Papers 966, C.E.P.R. Discussion Papers.
  10. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  11. Patricia M. Anderson & Simon M. Burgess, 2000. "Empirical Matching Functions: Estimation and Interpretation Using State-Level Data," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 93-102, February.
  12. Ulrich Kaiser & Winfried Pohlmeier, 2000. "Efficient Bargaining and the Skill-Structure of Wages and Employment," CoFE Discussion Paper 00-24, Center of Finance and Econometrics, University of Konstanz.
  13. Callen, Jeffrey L. & Fader, Chris & Krinsky, Itzhak, 2000. "Just-in-time: A cross-sectional plant analysis," International Journal of Production Economics, Elsevier, vol. 63(3), pages 277-301, January.
  14. Lucy Chennells & John Van Reenen, 1999. "Has technology hurt less skilled workers? A survey of the micro-econometric evidence," IFS Working Papers W99/27, Institute for Fiscal Studies.
  15. Bernd Fitzenberger, 1999. "International Trade and the Skill Structure of Wages and Employment in West Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 219(1+2), pages 67-89, July.
  16. Jacobebbinghaus, Peter & Zwick, Thomas, 2001. "New technologies and the demand for medium qualified labour in Germany," ZEW Discussion Papers 01-12, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  17. Ulrich Kaiser, 2000. "New Technologies And The Demand For Heterogeneous Labor: Firm-Level Evidence For The German Business-Related Service Sector," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 9(5), pages 465-486.
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