Technology Shocks and Employment

Fabrice Collard () and Harris Dellas

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: Recent empirical work has suggested that in response to a positive technology shock employment shows a persistent decline. This finding has raised doubts concerning the relevance of the RBC model as well as the quantitative significance of technology shocks as a source of aggregate fluctuations. We show that the standard, open economy, flexible price RBC model can easily match the negative conditional correlation between productivity and employment quite well if domestic and foreign goods are not good substitutes in the short run. The computed variance-decompositions also suggest that there is no empirical inconsistency between matching this correlation and accepting that technology shocks are the main source of variation in output while demand shocks are the main source of variation in employment. Moreover, using a low rather than a high degree of substitution does not worsen model performance along any other dimensions.

Keywords: technological shocks; employment; open economy; flexible prices; staggered prices (search for similar items in EconPapers)
JEL-codes: E32 E24 (search for similar items in EconPapers)
Date: 2002-12
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Related works:
Working Paper: Technology Shocks and Employment (2003)
Journal Article: Technology Shocks and Employment (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:ube:dpvwib:dp0217

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