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Uneven Technical Progress and Job Destructions

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  • Cohen, Daniel
  • Saint-Paul, Gilles

Abstract

We develop a two-sector model in which technological progress alternatively raises the productivity of one sector after another. We assume that goods are complements for the final consumers. The sector which benefits from technical progress will see a resulting fall in its price . In this model, any uneven technical progress leads to job destruction in the sector which benefits from it, and job creation in the least productive sector. We examine the pattern of wages and unemployment that follow shocks (symmetric or asymmetric) which can occur in the economy. We show that wages will immediately rise and overshoot their long-run target: as time passes they must fall, as will the degree of tightness in the labour market (and sometimes unemployment). An `age of diminished expectations' following any productivity shock is then likely to occur sooner or later.

Suggested Citation

  • Cohen, Daniel & Saint-Paul, Gilles, 1994. "Uneven Technical Progress and Job Destructions," CEPR Discussion Papers 979, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:979
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    Cited by:

    1. Forslund, Anders & Lindh, Thomas, 2004. "Decentralisation of bargaining and manufacturing employment: Sweden 1970-96," Working Paper Series 2004:3, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    2. Treier, Volker, 1999. "Unemployment in reforming countries: Causes, fiscal impacts and the success of transformation," BERG Working Paper Series 29, Bamberg University, Bamberg Economic Research Group.
    3. Saint-Paul, Gilles, 2002. "Employment protection, international specialization, and innovation," European Economic Review, Elsevier, vol. 46(2), pages 375-395, February.
    4. Gersbach, Hans & Schniewind, Achim, 2002. "Uneven Technical Progress and Unemployment," IZA Discussion Papers 478, Institute for the Study of Labor (IZA).
    5. Ramser, Hans Jürgen, 1995. "Arbeitslosigkeit und Wirtschaftswachstum," Discussion Papers, Series I 278, University of Konstanz, Department of Economics.
    6. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2007. "Technology—Policy Interaction in Frictional Labour-Markets," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1089-1124.
    7. Philippe Askenazy, 1997. "Commerce Nord-Sud, inégalités et croissance endogène," Revue Économique, Programme National Persée, vol. 48(5), pages 1219-1240.
    8. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L, 2005. "The Replacement Problem in Frictional Economies: An 'Equivalence Result'," CEPR Discussion Papers 5026, C.E.P.R. Discussion Papers.
    9. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2005. "The Replacement Problem In Frictional Economies: A Near-Equivalence Result," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1007-1057, September.

    More about this item

    Keywords

    Diminished Expectations; Technical Progress; Unemployment;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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