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Speed of Technical Progress and Length of the Average Interjob Period

Author

Listed:
  • William J. Baumol

    (The Jerome Levy Economics Institute)

  • Edward N. Wolff

    (The Jerome Levy Economics Institute)

Abstract

The mean duration of unemployment has approximately doubled in the U.S. between the early 1950s and the mid-1990s, with most of the increase occurring since the early 1970s. We first construct a simple model linking the average duration of unemployment with the speed of technical change. Using aggregate time-series data for the U.S., we find strong evidence that both the rate of TFP growth and investment in office, computing, and accounting equipment (OCA) per employee have a significant positive effect on mean unemployment duration. Moreover, literally all of the two-thirds rise in mean unemployment duration between 1971 and 1994 (two similar points in the business cycle) can be attributed to increases in OCA investment.

Suggested Citation

  • William J. Baumol & Edward N. Wolff, 1998. "Speed of Technical Progress and Length of the Average Interjob Period," Macroeconomics 9805022, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:9805022
    Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 43; figures: included
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/9805/9805022.pdf
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    Cited by:

    1. William J. Baumol & Edward N. Wolff, "undated". "Side Effects of Progress, How Technological Change Increases the Duration of Unemployment," Economics Public Policy Brief Archive ppb_41, Levy Economics Institute.
    2. Robert G. Valletta, 1998. "Changes in the structure and duration of U.S. unemployment, 1967-1998," Economic Review, Federal Reserve Bank of San Francisco, pages 29-40.
    3. Bharat Trehan, 2003. "Productivity shocks and the unemployment rate," Economic Review, Federal Reserve Bank of San Francisco, pages 13-27.
    4. Mukoyama, Toshihiko & Sahin, Aysegl, 2009. "Why did the average duration of unemployment become so much longer?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 200-209, March.
    5. Pedro Portugal & José Ferreira Machado, 2006. "U.S. Unemployment Duration: Has Long Become Longer or Short Become Shorter?," Working Papers w200613, Banco de Portugal, Economics and Research Department.
    6. Lücke, Matthias, 1999. "Sectoral value added prices, TFP growth, and the low-skilled wage in high-income countries," Kiel Working Papers 923, Kiel Institute for the World Economy (IfW Kiel).

    More about this item

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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