Short-Run Pain, Long-Run Gain? Recessions and Technological Transformation

40 Pages Posted: 27 Nov 2017  

Alexandr Kopytov

University of Pennsylvania - Finance Department

Nikolai L. Roussanov

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Mathieu Taschereau-Dumouchel

Cornell University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 20, 2017

Abstract

Recent empirical evidence suggests that skill-biased technological change that shifts labor demand towards non-routine jobs has accelerated during the Great Recession. We analyze the interaction between the gradual process of transition towards a skill intensive technology and business cycles in a standard neoclassical growth framework. In the model, periods of depressed economic activity are used by firms to deeply reorganize production and by routine workers to acquire new skills due to low opportunity costs. As a result, additional resources are diverted from production, amplifying the effect of a negative TFP shock. At the same time, recessions speed up technological transformation. For a reasonable parametrization, the model is able to match both the long-run trend in the routine employment share and the dramatic impact of the Great Recession on such jobs.

Keywords: job polarization, routine-biased technical change, business cycle, human capital investment, upskilling, Great Recession

JEL Classification: E24, E32, O33, J24

Suggested Citation

Kopytov, Alexandr and Roussanov, Nikolai L. and Taschereau-Dumouchel, Mathieu, Short-Run Pain, Long-Run Gain? Recessions and Technological Transformation (November 20, 2017). Available at SSRN: https://ssrn.com/abstract=3074953 or http://dx.doi.org/10.2139/ssrn.3074953

Alexandr Kopytov (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Nikolai L. Roussanov

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mathieu Taschereau-Dumouchel

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

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