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THE IMPACT OF TFP GROWTH ON STEADY‐STATE UNEMPLOYMENT *
Author(s) -
Pissarides Christopher A.,
Vallanti Giovanna
Publication year - 2007
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2007.00439.x
Subject(s) - total factor productivity , economics , unemployment , capitalization , creative destruction , embodied cognition , productivity , labour economics , panel data , macroeconomics , econometrics , neoclassical economics , philosophy , linguistics , artificial intelligence , computer science
Theoretical predictions of the impact of total factor productivity (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.