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Technological progress, firm selection, and unemployment

Author

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  • Kosho Tanaka

    (Graduate School of Economics, Nagoya University)

Abstract

In the standard search-matching model, the effect of an increase in the productivity growth rate on the unemployment rate is quantitatively much smaller than that found in the data. This paper revisits this issue by considering the selection effect, through which an increase in the rate of disembodied technological progress induces firms with low productivity levels to exit and increases the average productivity. With this effect, one percent-point increase in the rate of technological progress decreases the unemployment rate by 0.28 percent, which is about 40 times as strong as the effect in the corresponding model without the selection effect.

Suggested Citation

  • Kosho Tanaka, 2018. "Technological progress, firm selection, and unemployment," Economics Bulletin, AccessEcon, vol. 38(1), pages 431-442.
    • Handle: RePEc:ebl:ecbull:eb-17-00780
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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