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Speed of Technical Progress and Length of the Average Interjob Period

  • William J. Baumol
  • Edward N. Wolff

The mean duration of unemployment has approximately doubled in the U.S. between the early 1950s and the mid-1990s, with most of the increase occurring since the early 1970s. We first construct a simple model linking the average duration of unemployment with the speed of technical change. Using aggregate time-series data for the U.S., we find strong evidence that both the rate of TFP growth and investment in office, computing, and accounting equipment (OCA) per employee have a significant positive effect on mean unemployment duration. Moreover, literally all of the two-thirds rise in mean unemployment duration between 1971 and 1994 (two similar points in the business cycle) can be attributed to increases in OCA investment.

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Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_237.

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Date of creation: May 1998
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Handle: RePEc:lev:wrkpap:wp_237
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