Working Paper: CEPR ID: DP6365
Authors: Fabio Canova; Jose David Lopez-Salido; Claudio Michelacci
Abstract: We analyze the effects of neutral and investment-specific technology shocks on hours worked and unemployment. We characterize the response of unemployment in terms of job separation and job finding rates. We find that job separation rates mainly account for the impact response of unemployment while job finding rates for movements along its adjustment path. Neutral shocks increase unemployment and explain a substantial portion of unemployment and output volatility; investment-specific shocks expand employment and hours worked and mostly contribute to hours worked volatility. We show that this evidence is consistent with the view that neutral technological progress prompts Schumpeterian creative destruction, while investment specific technological progress has standard neoclassical features.
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 |
|---|---|
| Neutral technology shocks (E39) | Unemployment (J64) |
| Job separation rate (J63) | Unemployment (J64) |
| Job finding rate (J68) | Unemployment (J64) |
| Investment-specific technology shocks (E22) | Aggregate hours worked (J22) |
| Investment-specific technology shocks (E22) | Unemployment (J64) |
| Technology shocks (O33) | Cyclical fluctuations of key labor market variables (E32) |
| Technology shocks (O33) | Unemployment (J64) |