Author(s):	Jose David Lopez-Salido, Claudio Michelacci
Publication Date:	June 2004
Keyword(s):	creative destruction, search frictions, technological progress
JEL(s):	E00, J60, O33
Programme Areas:	International Macroeconomics, Labour Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=4426

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.