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Technology, Unemployment, and Inflation

Jacob Mincer

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Stephan Danninger

International Monetary Fund (Research Department)

July 2000

NBER Working Paper No. w7817

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.

Number of Pages in PDF File: 48

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Date posted: July 26, 2000  

Suggested Citation

Mincer, Jacob and Danninger, Stephan, Technology, Unemployment, and Inflation (July 2000). NBER Working Paper No. w7817. Available at SSRN: http://ssrn.com/abstract=237141

Contact Information

Jacob Mincer
Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )
420 W. 118th Street
New York, NY 10027
United States
212-854-3676 (Phone)
212-854-8059 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Stephan Danninger (Contact Author)
International Monetary Fund (Research Department) ( email )
700 19th Street, NW
Washington, DC 20431
United States
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