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Technology Shocks around the World

  • Dupaigne, Martial
  • Fève, Patrick

This article investigates the effects of a permanent technology shock on labor input in the major seven developed countries. The recent empirical literature which uses Structural Vector Autoregressions (SVAR) with long-run restrictions has argued that technology shocks lead to a persistent and significant decline in employment in most of the G7 countries. We claim that the international transmission of shocks prevents the use of existing SVAR models, but also suggests alternative specifications to properly uncover their effects. We show in a quantitative two-country model that a measure of labor productivity aggregated across countries is more immune to persistent, if not permanent, shocks and allows to accurately identify the responses of the labor input to a technology shock. Using labor productivity at the G7 aggregate level, we find that the response of employment changes critically in most of the major seven developed countries. (Copyright: Elsevier)

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 346.

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Date of creation: Apr 2005
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Publication status: Published in Review of Economic Dynamics, vol.�12, n°4, octobre 2009, p.�592-607.
Handle: RePEc:ide:wpaper:4484
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  1. M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2003. "International Business Cycles: World, Region, and Country-Specific Factors," American Economic Review, American Economic Association, vol. 93(4), pages 1216-1239, September.
  2. Baxter, M. & Crucini, M.J., 1990. "Explaining Saving/Investment Correlation," RCER Working Papers 224, University of Rochester - Center for Economic Research (RCER).
  3. Dupaigne, M. & Fève, P. & Matheron, J., 2005. "Technology Shock and Employment: Do We Really Need DSGE Models with a Fall in Hours?," Working papers 124, Banque de France.
  4. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
  5. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What happens after a technology shock?," International Finance Discussion Papers 768, Board of Governors of the Federal Reserve System (U.S.).
  6. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
  7. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1987. "International real business cycles," Working Papers 426, Federal Reserve Bank of Minneapolis.
  8. Hyungsik Roger MOON & Benoit PERRON, 2002. "Testing For A Unit Root In Panels With Dynamic Factors," Cahiers de recherche 18-2002, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  9. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  10. Ramey, Valerie A & Francis, Neville, 2002. "Is The Technology-Driven Real Business Cycle Hypothesis Dead? Shocks and Aggregate Fluctuations Revisted," University of California at San Diego, Economics Working Paper Series qt6x80k3nx, Department of Economics, UC San Diego.
  11. Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," International Finance Discussion Papers 462, Board of Governors of the Federal Reserve System (U.S.).
  12. Wen, Yi, 2001. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations? Comment," Working Papers 01-19, Cornell University, Center for Analytic Economics.
  13. Julien Matheron & Martial Dupaigne & Patrick Feve, 2005. "Technology Shock and Employment: Do We Need Models with a Fall in Hours?," 2005 Meeting Papers 315, Society for Economic Dynamics.
  14. Michael D. Bordo & Thomas Helbling, 2003. "Have National Business Cycles Become More Synchronized?," NBER Working Papers 10130, National Bureau of Economic Research, Inc.
  15. James H. Stock & Mark W. Watson, 2003. "Understanding Changes in International Business Cycle Dynamics," NBER Working Papers 9859, National Bureau of Economic Research, Inc.
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