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Investment-Specific Technology Shocks and Labor Market Frictions

Reinout De Bock

International Monetary Fund (IMF)

February 1, 2007

National Bank of Belgium Working Paper No. 108

This paper studies the implications of technical progress through investment-specific technical change in a business cycle model with search and matching frictions and endogenous job destruction. The interaction between the capital formation needed to reap the benefits of an investment-specific technology shock and gradual labor-market matching, generates hump-shaped, persistent responses in output, vacancies, and unemployment. The endogenous job destruction decision also leads to small but persistent endogenous fluctuations in total factor productivity. Simulations suggest a limited role for investment-specific technology shocks as a source of business cycle fluctuations compared to a standard real business cycle model.

Number of Pages in PDF File: 43

Keywords: Labor Market Frictions, Investment-specific Technology Shocks, Business Cycles

JEL Classification: E24, E32, J64

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Date posted: October 7, 2010  

Suggested Citation

De Bock, Reinout, Investment-Specific Technology Shocks and Labor Market Frictions (February 1, 2007). National Bank of Belgium Working Paper No. 108. Available at SSRN: http://ssrn.com/abstract=1687634 or http://dx.doi.org/10.2139/ssrn.1687634

Contact Information

Reinout De Bock (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
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