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Schumpeterian technology shocks

Fabio Canova (), David Lopez-Salido () and Claudio Michelacci ()

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We analyze the labor market effects of neutral and investment-specific technology shocks along the intensive margin (hours worked) and the extensive margin (unemployment). We characterize the dynamic response of unemployment in terms of the job separation and the job finding rate. Labor market adjustments occur along the extensive margin in response to neutral shocks, along the intensive margin in response to investment specific shocks. The job separation rate accounts for a major portion of the impact response of unemployment. Neutral shocks prompt a contemporaneous increase in unemployment because of a sharp rise in the separation rate. This is prolonged by a persistent fall in the job finding rate. Investment specific shocks rise employment and hours worked. Neutral shocks explain a substantial portion of the volatility of unemployment and output; investment specific shocks mainly explain hours worked volatility. This suggests that neutral progress is consistent with Schumpeterian creative destruction, while investment-specific progress operates as in a neoclassical growth model.

Keywords: Search frictions; technological progress; creative destruction (search for similar items in EconPapers)
JEL-codes: E00 J60 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-tid
Date: 2006-05, Revised 2007-11
References: View references in EconPapers View complete reference list from CitEc
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1012

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