Technology Shocks and Job Flows

71 Pages Posted: 6 Jul 2004

See all articles by Claudio Michelacci

Claudio Michelacci

Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR)

David Lopez-Salido

Board of Governors of the Federal Reserve System

Date Written: June 2004

Abstract

We decompose the low-frequency movements in labour productivity into an investment-neutral and investment-specific technology component. We show that neutral technology shocks cause an increase in job creation and job destruction and lead to a reduction in aggregate employment. Investment-specific technology shocks reduce job destruction, have mild effects on job creation and are expansionary. We construct a general equilibrium search model with neutral and investment-specific technological progress. We show that the model can replicate these findings if neutral technological progress is mainly embodied into new jobs, while investment-specific technological progress benefits (almost) equally old and new jobs. Thus neutral technological advances prompt waves of Schumpeterian creative destruction, while the adoption of investment-specific technologies operates mainly as in the standard neoclassical growth model.

Keywords: Search frictions, technological progress, creative destruction

JEL Classification: E00, J60, O33

Suggested Citation

Michelacci, Claudio and Lopez-Salido, David, Technology Shocks and Job Flows (June 2004). CEPR Discussion Paper No. 4426. Available at SSRN: https://ssrn.com/abstract=562084

Claudio Michelacci (Contact Author)

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
+34 91 4290 551 (Phone)
+34 91 4291 056 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

David Lopez-Salido

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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