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Pace versus Type: The Effect of Economic Growth on Unemployment and Wage Patterns

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  • Martine Carre

    (Universite de Caen)

  • David Drouot

    (Universite d'Evry Val d'Essonne)

Abstract

Much of the literature on growth and unemployment has emphasized the effect of the increasing pace of technological progress on job instability and wage inequality. But less attention has been placed on how the changes in the very nature of work, due to technical change, affects the rate of job destruction, and hence the level of unemployment. We argue that technological progress modifies on-the-job learning and, through general equilibrium effects, unemployment and wage dispersion. In the context of the canonical Mortensen and Pissarides [1998] model, we show that, in a routine world, this 'on-the-job learning effect' can offset the creative destruction effect induced by an increase in the pace of technological change on unemployment, whereas it can amplify it as jobs become less routine. Moreover, the relationship between wage dispersion and growth can be non monotone. This finding helps explain the wage compression/expansion observed in time series data. (Copyright: Elsevier)

Suggested Citation

  • Martine Carre & David Drouot, 2004. "Pace versus Type: The Effect of Economic Growth on Unemployment and Wage Patterns," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 737-757, July.
  • Handle: RePEc:red:issued:v:7:y:2004:i:3:p:737-757 DOI: 10.1016/j.red.2003.12.002
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    References listed on IDEAS

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    Cited by:

    1. Jean-Baptiste Michau, 2013. "Creative Destruction with On-the-Job Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 691-707, October.
    2. Thomas B. King, 2005. "Labor productivity and job-market flows: trends, cycles, and correlations," Supervisory Policy Analysis Working Papers 2005-04, Federal Reserve Bank of St. Louis.
    3. Pierre-Jean Messe & Eva Moreno-Galbis & François-Charles Wolf, 2014. "Retirement intentions in the presence of technological change: Theory and evidence from France," TEPP Working Paper 2014-04, TEPP.

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