Technology Adoption, Job Matching Frictions and Business Creation

Andrea Colciago and Federico Etro ()

No 2012:30, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We study the impact of a General Purpose Technology that changes the cost structure turning fixed costs into variable ones in most sectors. A major recent example is cloud computing, whose adoption allows firms to avoid large up-front costs in IT and to rent computing capability online. We study the macroeconomic impact of the adoption of such an innovation in a DSGE model with endogenous market structures in the goods market and search and matching frictions in the labor market. To start a business, firms need to hire workers from the pool of unemployed agents and set up a stock of IT capital: the new technology allows them to rent computing capabilities reducing entry costs. Such an innovation can have a substantial impact on business and job creation.

Keywords: Endogenous entry; General purpose technology; Job creation; Search frictions; Cloud computing (search for similar items in EconPapers)
JEL-codes: J6 L1 O3 (search for similar items in EconPapers)
Pages: 35
Date: 2012
New Economics Papers: this item is included in nep-knm and nep-tid
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