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The labor market effects of technology shocks

Author

Listed:
  • Fabio Canova

    (Universitat Pompeu Fabra)

  • David López-Salido

    (Banco de España
    Centre for Economic Policy Research (CEPR))

  • Claudio Michelacci

    (Centro de Estudios Monetarios y Financieros (CEMFI))

Abstract

We analyze the effects of neutral and investment-specific technology shocks on hours worked and unemployment. We characterize the response of unemployment in terms of job separation and job finding rates. We find that job separation rates mainly account for the impact response of unemployment while job finding rates for movements along its adjustment path. Neutral shocks increase unemployment and explain a substantial portion of unemployment and output volatility; investment-specific shocks expand employment and hours worked and mostly contribute to hours worked volatility. We show that this evidence is consistent with the view that neutral technological progress prompts Schumpeterian creative destruction, while investment specific technological progress has standard neoclassical features.

Suggested Citation

  • Fabio Canova & David López-Salido & Claudio Michelacci, 2007. "The labor market effects of technology shocks," Working Papers 0719, Banco de España.
  • Handle: RePEc:bde:wpaper:0719
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    Cited by:

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    2. Federico S. Mandelman & Francesco Zanetti, 2008. "Estimating general equilibrium models: an application with labour market frictions," Technical Books, Centre for Central Banking Studies, Bank of England, edition 1, number 1.
    3. Federico S. Mandelman & Francesco Zanetti, 2008. "Technology shocks, employment, and labor market frictions," FRB Atlanta Working Paper 2008-10, Federal Reserve Bank of Atlanta.
    4. Albert van der Horst & Hugo Rojas-Romagosa & Leon Bettendorf, 2009. "Does employment affect productivity?," CPB Discussion Paper 119, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Lovcha, Yuliya & Perez-Laborda, Alejandro, 2015. "The Hours Worked–Productivity Puzzle: Identification In A Fractional Integration Setting," Macroeconomic Dynamics, Cambridge University Press, vol. 19(7), pages 1593-1621, October.
    6. Bondzie, Eric Amoo & Fosu, Gabriel Obed & Obu-Cann, Ernest, 2013. "Technological shocks mechanism on Macroeconomic Variables: A Dynamic Stochastic General Equilibrium (DSGE) approach," MPRA Paper 69286, University Library of Munich, Germany, revised Jan 2014.
    7. Fernald, John G., 2007. "Trend breaks, long-run restrictions, and contractionary technology improvements," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2467-2485, November.
    8. Pengfei Wang & Yi Wen, 2011. "Understanding the Effects of Technology Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(4), pages 705-724, October.
    9. Michael Reiter, 2008. "Embodied Technical Change and the Fluctuations of Unemployment and Wages," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 695-721, March.
    10. Fabio Canova & Filippo Ferroni, 2011. "Multiple filtering devices for the estimation of cyclical DSGE models," Quantitative Economics, Econometric Society, vol. 2(1), pages 73-98, March.
    11. Qamar Farooq & Peihua Fu & Shahzad Ahmad & Yanni Zhang & Yunhong Hao, 2019. "Assessing Human Factor in the Adoption of Computer-Based Information Systems as the Internal Corporate Social Responsibility," SAGE Open, , vol. 9(3), pages 21582440198, August.
    12. Fabio Canova & David López-Salido & Claudio Michelacci, 2006. "On the robust effects of technology shocks on hours worked and output," Economics Working Papers 1013, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2008.
    13. Ríos-Rull, José-Víctor & Santaeulàlia-Llopis, Raül, 2010. "Redistributive shocks and productivity shocks," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 931-948, November.

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    More about this item

    Keywords

    search frictions; technological progress; creative destruction;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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