Investment-Specific Technology Shocks and Labor Market Frictions

Reinout De Bock

No 108, Working Paper Research from National Bank of Belgium

Abstract: This paper studies the implications of technical progress through investment-specific technical change in a business cycle model with search and matching frictions and endogenous job destruction. The interaction between the capital formation needed to reap the benefits of an investment-specific technology shock and gradual labor-market matching, generates hump-shaped, persistent responses in output, vacancies, and unemployment. The endogenous job destruction decision also leads to small but persistent endogenous fluctuations in total factor productivity. Simulations suggest a limited role for investment-specific technology shocks as a source of business cycle fluctuations compared to a standard real business cycle model.

Keywords: LaborMarket Frictions; Investment-specific Technology Shocks; Business Cycles (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2007-01
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:200701-01

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