Discussion Paper Details

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Title: The Labour Market Effects of Technology Shocks

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

Publication Date: June 2007

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

Programme Area(s): International Macroeconomics and Labour Economics

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.

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Bibliographic Reference

Canova, F, Lopez-Salido, J and Michelacci, C. 2007. 'The Labour Market Effects of Technology Shocks'. London, Centre for Economic Policy Research.