DP1930 Adjusting to a New Technology: Experience and Training

Author(s): Elhanan Helpman, Antonio Rangel
Publication Date: August 1998
Keyword(s): experience, New Technology, output adjustment, Training
JEL(s): O30
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1930

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.