Abstract

http://ssrn.com/abstract=875144
 
 

References (29)



 
 

Citations (13)



 


 



Technology Shocks and Labor Market Dynamics: Some Evidence and Theory


Zheng Liu


Fed San Francisco; Emory University - Department of Economics

Louis Phaneuf


Universite du Quebec a Montreal; Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

November 30, 2005


Abstract:     
We study the effects of technology shocks on labor market dynamics. We provide evidence that a positive technology shock leads to a weak response in nominal wage inflation, a modest decline in price inflation, and a modest rise in the real wage on impact and a permanent rise in the long run. The same shock may lead to a rise or fall in per capita hours, depending on whether hours enter the empirical model in levels or in differences. But the dynamic behaviors of wages and prices are robust across our alternative empirical specifications. We examine what theories may be able to explain the evidence. After arguing that a standard RBC model and its variants fail to explain the evidence about wages and prices, we show that, under plausible parameter values, a pure sticky-price model does not succeed either. However, a model with both nominal wage and price rigidities can be more successful. On this ground, we argue that to explain the effects of technology shocks on labor market dynamics may call for a significant departure from the traditional RBC paradigm.

Number of Pages in PDF File: 37

Keywords: Technology Shock, Employment, Wages, Prices, Business Cycle

JEL Classification: E31, E32, E52

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Date posted: January 14, 2006  

Suggested Citation

Liu, Zheng and Phaneuf, Louis, Technology Shocks and Labor Market Dynamics: Some Evidence and Theory (November 30, 2005). Available at SSRN: http://ssrn.com/abstract=875144 or http://dx.doi.org/10.2139/ssrn.875144

Contact Information

Zheng Liu (Contact Author)
Fed San Francisco ( email )
101 Market Street
San Francisco, CA 94105
United States
Emory University - Department of Economics ( email )
1602 Fishburne Drive
Atlanta, GA 30322
United States
Louis Phaneuf
Universite du Quebec a Montreal ( email )
P.O. Box 8888, Downtown Station
Montreal, Quebec H3C 3P8
Canada
514-987-6181 (Phone)
Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)
Pavillon De Sève
Ste-Foy, Quebec G1K 7P4
Canada
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