Working Paper: CEPR ID: DP1930
Authors: Elhanan Helpman; Antonio Rangel
Abstract: 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.
Keywords: new technology; training; experience; output adjustment
JEL Codes: O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| arrival of new GPT (Y20) | initial recession (F44) |
| initial recession (F44) | aggregate output (E10) |
| productivity of inexperienced workers (J24) | initial recession (F44) |
| speed of productivity growth with experience (O49) | likelihood of recession (E32) |
| educational requirements (I29) | likelihood of recession (E32) |
| experienced workers switching to new technology (O33) | aggregate output (E10) |
| arrival of new GPT (Y20) | aggregate output (E10) |