Discussion paper

DP1930 Adjusting to a New Technology: Experience and Training

In this paper we study how aggregate output responds to the arrival of a new General Purpose Technology (GPT) by looking at adjustment mechanisms that operate through labour markets. We show that under a wide set of circumstances the arrival of a new GPT that raises long-run output can trigger a recession in the short run. Furthermore, we characterize features of the GPT that produce a cyclical adjustment path. An initial recession occurs whenever a higher education level is required to operate the new GPT. But a recession can also occur when the new GPT has lower educational requirements. A cyclical adjustment path is more likely when inexperienced workers are less productive with the new technology and the faster productivity rises with experience in the new sector.

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Citation

Helpman, E and A Rangel (1998), ‘DP1930 Adjusting to a New Technology: Experience and Training‘, CEPR Discussion Paper No. 1930. CEPR Press, Paris & London. https://cepr.org/publications/dp1930