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Technology, Unemployment, and Inflation

  • Jacob Mincer
  • Stephan Danninger

We explore the response of employment (unemployment) skill differentials to skill-biased shifts in demand touched off by the new and spreading technologies. We find that skill differentials in unemployment follow at least in part the same pattern as skill differentials in wages: They widen initially but decline after a roughly 5-year lag, allowing time for training and learning to handle the new technologies. In the micro (PSID) cross-section the differentials show up as sectoral differences defined by technology. In the aggregate time series relative unemployment is defined by educational unemployment differentials. We find that the pace and turnaround in the unemployment gap' is twice as fast as in the wage gap'. Apparently, the hiring and training response is quicker than the wage response. We also observe in time series that the pace of technology has unclear effects on aggregate unemployment in the short run, but appears to reduce it in the longer run. In addition to technology, maturing of the workforce, and growth of international trade reduce unemployment in the longer run. The same variables also significantly reduce inflation in both the short and long run. Given the actual changes in these factors in the early 90's we are able to predict a little over a half of the decline in unemployment and about 70% of the reduction in inflation in the latter half of the last decade.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7817.

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Date of creation: Jul 2000
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Publication status: published as Polachek, Solomon W. (ed.) Worker well-being, Research in Labor Economics, vol. 19. Amsterdam; New York and Tokyo: Elsevier Science, JAI, 2000.
Handle: RePEc:nbr:nberwo:7817
Note: LS
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  1. Francis X. Diebold & David Neumark & Daniel Polsky, 1994. "Job Stability in the United States," NBER Working Papers 4859, National Bureau of Economic Research, Inc.
  2. Steven G. Allen, 1996. "Technology and the Wage Structure," NBER Working Papers 5534, National Bureau of Economic Research, Inc.
  3. Bartel, Ann P & Sicherman, Nachum, 1998. "Technological Change and the Skill Acquisition of Young Workers," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 718-55, October.
  4. Ann P. Bartel & Nachum Sicherman, 1997. "Technological Change and Wages: An Inter-Industry Analysis," NBER Working Papers 5941, National Bureau of Economic Research, Inc.
  5. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
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