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Technology shocks, employment, and labor market frictions

Federico Mandelman () and Francesco Zanetti ()

No 2008-10, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: Recent empirical evidence suggests that a positive technology shock leads to a decline in labor inputs. However, the standard real business cycle model fails to account for this empirical regularity. Can the presence of labor market frictions address this problem without otherwise altering the functioning of the model? We develop and estimate a real business cycle model using Bayesian techniques that allows but does not require labor market frictions to generate a negative response of employment to a technology shock. The results of the estimation support the hypothesis that labor market frictions are responsible for the negative response of employment.

Keywords: Econometric models; Technological innovations; Labor market (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-dge and nep-lab
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Working Paper: Technology shocks, employment and labour market frictions (2010) Downloads
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