Technology Adoption, Job Matching Frictions and Business Creation

35 Pages Posted: 21 Dec 2012

See all articles by Andrea Colciago

Andrea Colciago

De Nederlandsche Bank - Research Department; Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

Federico Etro

Ca Foscari University of Venice

Date Written: October 1, 2012

Abstract

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.

Keywords: Endogenous entry, General purpose technology, Job creation, Search frictions, Cloud computing

JEL Classification: L1, J6, O3

Suggested Citation

Colciago, Andrea and Etro, Federico, Technology Adoption, Job Matching Frictions and Business Creation (October 1, 2012). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 30/WP/2012, Available at SSRN: https://ssrn.com/abstract=2192008 or http://dx.doi.org/10.2139/ssrn.2192008

Andrea Colciago

De Nederlandsche Bank - Research Department ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

U6 Building
Viale Piero e Alberto Pirelli, 22
Milano, 20126
Italy

Federico Etro (Contact Author)

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

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