Productivity Growth and Employment: Theory and Panel Estimates

Christopher Pissarides and Giovanna Vallanti

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Theoretical predictions of the effect of TFP growth on employment are ambiguous, anddepend on the extent to which new technology is embodied in new jobs. We estimate amodel for employment, wages and investment with an annual panel for the United States,Japan and Europe and find that TFP growth increases employment. For the United StatesTFP growth explains the trend change in unemployment. We evaluate the model and findthat creative destruction plays no part in aggregate unemployment dynamics. The model canexplain up to half of the estimated impact of growth on unemployment.

Keywords: TFP growth; employment; creative destruction; capitalization effect; unemployment dynamics; embodied technology (search for similar items in EconPapers)
JEL-codes: E24 J64 O51 O52 (search for similar items in EconPapers)
Date: 2004-12
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Citations: View citations in EconPapers (25)

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Working Paper: Productivity growth and employment: theory and panel estimates (2004)
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