Technological progress, firm selection, and unemployment

Kosho Tanaka ()
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Kosho Tanaka: Graduate School of Economics, Nagoya University

Economics Bulletin, 2018, vol. 38, issue 1, 431-442

Abstract: In the standard search-matching model, the effect of an increase in the productivity growth rate on the unemployment rate is quantitatively much smaller than that found in the data. This paper revisits this issue by considering the selection effect, through which an increase in the rate of disembodied technological progress induces firms with low productivity levels to exit and increases the average productivity. With this effect, one percent-point increase in the rate of technological progress decreases the unemployment rate by 0.28 percent, which is about 40 times as strong as the effect in the corresponding model without the selection effect.

JEL-codes: J6 O4 (search for similar items in EconPapers)
Date: 2018-02-27
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