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Title: Technology Shocks and Job Flows

Author(s): Jose David Lopez-Salido and Claudio Michelacci

Publication Date: June 2004

Keyword(s): creative destruction, search frictions and technological progress

Programme Area(s): International Macroeconomics and Labour Economics

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.

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Bibliographic Reference

Lopez-Salido, J and Michelacci, C. 2004. 'Technology Shocks and Job Flows'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4426