Working Paper: CEPR ID: DP4426
Authors: Claudio Michelacci; Jose David Lopez-Salido
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.
Keywords: creative destruction; search frictions; technological progress
JEL Codes: E00; J60; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Positive neutral technology shock (O49) | Increase in job creation (J23) |
| Positive neutral technology shock (O49) | Increase in job destruction (J63) |
| Increase in job creation and job destruction (J63) | Contraction in aggregate employment (E24) |
| Investment-specific technology shock (E22) | Decrease in job destruction (J63) |
| Investment-specific technology shock (E22) | Increase in job creation (J23) |
| Investment-specific technology shock (E22) | Increase in employment (J23) |