Labor Market Effects of Technology Shocks

68 Pages Posted: 3 Jul 2007  

Fabio Canova

Universitat Pompeu Fabra - Department of Economics and Business (DEB); European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); University of Southampton - Division of Economics; Centre for Economic Policy Research (CEPR)

David Lopez-Salido

Board of Governors of the Federal Reserve System

Claudio Michelacci

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

Date Written: July 2007

Abstract

We analyze the effects of neutral and investment-specific technology shocks on hours worked and unemployment. We characterize the response of unemployment in terms of job separation and job finding rates. We find that job separation rates mainly account for the impact response of unemployment while job finding rates for movements along its adjustment path. Neutral shocks increase unemployment and explain a substantial portion of unemployment and output volatility; investment-specific shocks expand employment and hours worked and mostly contribute to hours worked volatility. We show that this evidence is consistent with the view that neutral technological progress prompts Schumpeterian creative destruction, while investment specific technological progress has standard neoclassical features.

Keywords: search frictions, technological progress, creative

JEL Classification: E00, J60, O33

Suggested Citation

Canova, Fabio and Lopez-Salido, David and Michelacci, Claudio, Labor Market Effects of Technology Shocks (July 2007). Banco de España Research Paper No. WP-0719. Available at SSRN: https://ssrn.com/abstract=997991 or http://dx.doi.org/10.2139/ssrn.997991

Fabio Canova

Universitat Pompeu Fabra - Department of Economics and Business (DEB) ( email )

Barcelona, 08005
Spain

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

University of Southampton - Division of Economics

Southampton, SO17 1BJ
United Kingdom

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

David Lopez-Salido (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

Claudio Michelacci

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)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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