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Technological Change, the Labor Market and the Stock Market

  • Rodolfo E. Manuelli

This paper presents a model in which a partially anticipated technological shock results, in the short-run, in lower investment and higher unemployment. Because of the expectation of future lower profits, the market value of existing firms --and the wages they pay-- decrease before the technology becomes available. When the new technology arrives, the market value of new firms rises, investment and average wages increase, but endogenous gradual adoption results in temporary wage dispersion among identical workers. The model shows that the factors that affect the rate of adoption of a new technology also influence the cross sectional dispersion of labor earnings among identical workers, and firms' market values. The predictions of the model seem to be broadly consistent with the U.S. experience of the last thirty years.

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File URL: http://www.nber.org/papers/w8022.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8022.

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Date of creation: Nov 2000
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Handle: RePEc:nbr:nberwo:8022
Note: EFG
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  2. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
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  8. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
  9. Andrew Atkeson & Patrick Kehoe, 1997. "Industry Evolution and Transition: A Neoclassical Benchmark," NBER Working Papers 6005, National Bureau of Economic Research, Inc.
  10. Christopher L. Foote, 1998. "Trend Employment Growth and the Bunching of Job Creation and Destruction," Harvard Institute of Economic Research Working Papers 1818, Harvard - Institute of Economic Research.
  11. Timothy Dunne & Lucia Foster & John Haltiwanger & Kenneth Troske, 2000. "Wage and Productivity Dispersion in U.S. Manufacturing: The Role of Computer Investment," Working Papers 00-01, Center for Economic Studies, U.S. Census Bureau.
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  13. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 19 pages.
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  15. Greenwood, J. & Yorukoglu, M., 1996. "1974," RCER Working Papers 429, University of Rochester - Center for Economic Research (RCER).
  16. Daron Acemoglu & Robert Shimer, 2000. "Wage and Technology Dispersion," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 585-607.
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  18. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  19. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932.
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