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Pace versus type: the effect of economic growth on unemployment and wage patterns

Author

Listed:
  • Martine Carré
  • David Drouot

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-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 change 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 [Rev. Econ. Dynam. (1998) 733] 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. © 2004 Elsevier Inc. All rights reserved.

Suggested Citation

  • Martine Carré & David Drouot, 2004. "Pace versus type: the effect of economic growth on unemployment and wage patterns," Post-Print hal-02878002, HAL.
    • Handle: RePEc:hal:journl:hal-02878002
    DOI: 10.1016/j.red.2003.12.002
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    Cited by:

    1. Moreno-Galbis, Eva, 2012. "The impact of TFP growth on the unemployment rate: Does on-the-job training matter?," European Economic Review, Elsevier, vol. 56(8), pages 1692-1713.
    2. Pierre-Jean Messe & Eva Moreno-Galbis & Fran ois-Charles Wolf, 2014. "Retirement intentions in the presence of technological change: Theory and evidence from France," TEPP Working Paper 2014-04, TEPP.
    3. 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.
    4. 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.
    5. Giscard ASSOUMOU-ELLA, 2019. "Per capita gross domestic product and welfare of Gabonese households: A VAR model with exogenous hypothesis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(619), S), pages 185-204, Summer.

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