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The labor market effects of technology shocks

  • 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))

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.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/07/Fic/dt0719e.pdf
File Function: First version, July 2007
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Paper provided by Banco de España & Working Papers Homepage in its series Working Papers with number 0719.

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Length: 68 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:bde:wpaper:0719
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