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Technology Adoption, Job Matching Frictions and Business Creation

Listed author(s):
  • 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.

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File Function: 2012
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Paper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2012:30.

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Length: 35
Date of creation: 2012
Handle: RePEc:ven:wpaper:2012:30
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