Working Paper: CEPR ID: DP5002
Authors: Christopher Pissarides; Giovanna Vallanti
Abstract: Theoretical predictions of the impact of TFP growth on unemployment are ambiguous, and depend on the extent to which new technology is embodied in new jobs. We evaluate a model with embodied and disembodied technology, capitalization, and creative destruction effects by estimating the impact of TFP growth on unemployment in a panel of industrial countries. We find a large negative impact which implies that embodied technology and creative destruction play no role in the steady-state dynamics of unemployment. Capitalization effects explain some of the estimated impact but a part remains unexplained.
Keywords: capitalization effect; creative destruction; embodied technology; TFP growth; unemployment
JEL Codes: E24; J64; O51; O52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| TFP growth (O49) | unemployment (J64) |
| capitalization effects (G31) | unemployment (J64) |
| TFP growth + capitalization effects (D25) | unemployment (J64) |
| wage equation (J31) | unemployment (J64) |