Pissarides, Christopher and Vallanti, Giovanna (2007) The impact of TFP growth on steady-state unemployment. International Economic Review, 48 (2). pp. 607-640. ISSN 1007-0974
Theoretical predictions of the impact of TFP growth on unemployment are ambiguous, and depend on the extent to which new technology is embodied in new jobs. We evaluate a model with embodied and disembodied technology, capitalization, and creative destruction effects. In econometric estimates with a panel of industrial countries we find a large negative impact of TFP growth on unemployment, which implies that embodied technology and creative destruction play no role in the steady-state dynamics of unemployment. Capitalization effects explain some of the estimated impact but a part remains unexplained.
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