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Technology Adoption, Job Matching Frictions and Business Creation


  • Andrea Colciago

    () (Department of Economics, University Of Milan, Bicocca and Dutch National Bank)

  • Federico Etro

    () (Department of Economics, University Of Venice C� Foscari)


We study the impact of a General Purpose Technology that changes the cost structure turning fixed costs into variable ones in most sectors. A major recent example is cloud computing, whose adoption allows firms to avoid large up-front costs in IT and to rent computing capability online. We study the macroeconomic impact of the adoption of such an innovation in a DSGE model with endogenous market structures in the goods market and search and matching frictions in the labor market. To start a business, firms need to hire workers from the pool of unemployed agents and set up a stock of IT capital: the new technology allows them to rent computing capabilities reducing entry costs. Such an innovation can have a substantial impact on business and job creation.

Suggested Citation

  • Andrea Colciago & Federico Etro, 2012. "Technology Adoption, Job Matching Frictions and Business Creation," Working Papers 2012:30, Department of Economics, University of Venice "Ca' Foscari".
  • Handle: RePEc:ven:wpaper:2012:30

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    Cited by:

    1. Federico Etro, 2014. "The Theory Of Endogenous Market Structures," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 804-830, December.

    More about this item


    Endogenous entry; General purpose technology; Job creation; Search frictions; Cloud computing;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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