Technology Adoption, Turbulence and the Dynamics of Unemployment

Georg Duernecker

No ECO2008/10, Economics Working Papers from European University Institute

Abstract: The divergence of unemployment rates between the U.S. and Europe coincided with a substantial acceleration in capital-embodied technical change in the late 70’s. Furthermore, evidence suggests that European economies have been lagging behind the U.S. in the adoption and usage of new technologies. This paper argues that the pace of technology adoption plays a fundamental role for how an economy’s labor market reacts to an acceleration in capital-embodied growth. The framework proposed offers an appealing and novel explanation for the divergence of unemployment rates across economies that are hit by the very same shock (i.e. the acceleration in embodied technical change) but differ in their technology adoption behavior. Moreover, we challenge the conventional wisdom that high European unemployment is the result of institutional rigidities by claiming that institutions are not the principal cause per se but they rather amplify certain forces that promote the emergence of high unemployment.

Keywords: Unemployment; Labor Market Search and Matching; Turbulence; Skill Loss; Technology Adoption; Training (search for similar items in EconPapers)
JEL-codes: J24 J64 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-lab
Date: 2008
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