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Technology-Driven Unemployment

Gregory Casey ()

No 302, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: To examine the relationship between technological progress and unemployment, I study a model that features putty-clay production, directed technical change, and wage bargaining. The first goal of this project is to understand the forces that deliver a constant steady state unemployment rate in the presence of labor-saving technical change. Labor-saving technical change increases unemployment, which lowers wages and creates incentives for future investment in labor-using technologies. In the long run, this interaction generates a balanced growth path that is observationally equivalent to that of the standard neoclassical growth model, except that is also incorporates a positive steady state level of unemployment. The second goal is to understand the effects of technological breakthroughs that permanently lower the cost of creating new labor-saving technologies. Breakthroughs lead to faster growth in output per worker and wages, but also yield higher long-run unemployment and a lower labor share of income. Despite increasing the speed of technological progress, breakthroughs also slow economic growth in the short-run.

Date: 2018
New Economics Papers: this item is included in nep-dge, nep-gro and nep-ino
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More papers in 2018 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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