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Technology shocks, employment, and labor market frictions

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  • Federico S. Mandelman
  • Francesco Zanetti

Abstract

Recent empirical evidence suggests that a positive technology shock leads to a decline in labor inputs. However, the standard real business cycle model fails to account for this empirical regularity. Can the presence of labor market frictions address this problem without otherwise altering the functioning of the model? We develop and estimate a real business cycle model using Bayesian techniques that allows but does not require labor market frictions to generate a negative response of employment to a technology shock. The results of the estimation support the hypothesis that labor market frictions are responsible for the negative response of employment.

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  • Federico S. Mandelman & Francesco Zanetti, 2008. "Technology shocks, employment, and labor market frictions," FRB Atlanta Working Paper 2008-10, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:2008-10
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    2. Auray, Stéphane & de Blas, Beatriz, 2013. "Investment, matching and persistence in a modified cash-in-advance economy," Journal of Economic Dynamics and Control, Elsevier, vol. 37(3), pages 591-610.
    3. Bonev, Pavlin, 2013. "Government Intervention in Postsecondary Education in Bulgaria," MPRA Paper 52669, University Library of Munich, Germany.
    4. Rebei, Nooman, 2014. "What (really) accounts for the fall in hours after a technology shock?," Journal of Economic Dynamics and Control, Elsevier, vol. 45(C), pages 330-352.
    5. Zanetti Francesco, 2012. "The Laffer Curve in a Frictional Labor Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-23, September.
    6. Chopra, ParveshK., 2022. "A Systems Model to Measure Labour Market Dynamics," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 75(4), pages 465-518.

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    More about this item

    Keywords

    Econometric models; technological innovations; Labor market;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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