Working Paper: NBER ID: w8022
Authors: Rodolfo E. Manuelli
Abstract: This paper presents a model in which a partially anticipated technological shock results, in the short-run, in lower investment and higher unemployment. Because of the expectation of future lower profits, the market value of existing firms --and the wages they pay-- decrease before the technology becomes available. When the new technology arrives, the market value of new firms rises, investment and average wages increase, but endogenous gradual adoption results in temporary wage dispersion among identical workers. The model shows that the factors that affect the rate of adoption of a new technology also influence the cross sectional dispersion of labor earnings among identical workers, and firms' market values. The predictions of the model seem to be broadly consistent with the U.S. experience of the last thirty years.
Keywords: No keywords provided
JEL Codes: E24; J64; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Anticipated technological shocks (O33) | lower investment (G31) |
| Anticipated technological shocks (O33) | higher unemployment (J64) |
| Anticipated technological shocks (O33) | anticipated lower profits (E25) |
| anticipated lower profits (E25) | lower investment (G31) |
| anticipated lower profits (E25) | higher unemployment (J64) |
| Adoption of new technology (O33) | higher investment (G31) |
| Adoption of new technology (O33) | higher average wages (J31) |
| Adoption of new technology (O33) | lower unemployment (J68) |
| Adoption of new technology (O33) | increased wage dispersion (J31) |