Technology?Policy Interaction in Frictional Labour-Markets

Abstract

Does capital‐embodied technological change play an important role in shaping labour‐market outcomes? To address this question, we develop a model with vintage capital and search‐matching frictions where irreversible investment in new vintages of capital creates heterogeneity in productivity among firms, matched as well as vacant. We demonstrate that capital‐embodied technological change reduces labour demand and raises equilibrium unemployment and unemployment durations. In addition, the presence of labour‐market regulations (unemployment benefits, payroll taxes, and firing costs) exacerbates these effects. Thus, the model is qualitatively consistent with some key features of the European labour‐market experience relative to that of the U.S.: it features a sharper rise in unemployment and a sharper fall in the vacancy rate and the labour share. A calibrated version of our model suggests that this technology–policy interaction could explain a sizeable fraction of the observed differences between the U.S. and Europe.

Availability, Affordability and Volatility: The Case of Hong Kong Housing Market

“…It seems reasonable to conclude that income inequality in Hong Kong is indeed widening. 41 Some 38 Among others, see also Acemoglu (2002) and Hornstein et al (2007) for related analyses. 39 Among others, see Lui (2011) for a related analysis.…”

Labor Immobility in Japan: Its Causes and Consequences

“…Some of junior level clerical workers are no longer found in Japanese offices 14 : The majority of them are now outsourced and partially substituted away by PC and the use of other IT technology. Having observed early failures of internalizing some professional positions 15 , many firms perhaps decided to rely on either contractual outsourcing or specialized subsidiaries to handle IT related tasks. We also find some evidence showing some professional positions in the finance sector are filled by the use of head hunters and rely almost exclusively on mid career quits.…”

“…Rather than modeling explicitly the productivity growth of new technology, we model such technology shock affecting negatively the relative position of the existing jobs. This shortcut simplifies the model greatly, but, interested readers should consult Mortensen and Pissarides (1998) and Hornstein et al (2007) for explicit modeling of technology advancement in search theoretic models.…”

“…15 Recall many troubles in integrating the computer systems after mergers of major city banks. They revealed that the "legacy" of the system is extremely costly to undo.…”

Declining Labor Force Attachment and Downward Trends in Unemployment and Participation

“…Because M types are at the margin of participation, small idiosyncratic or 1 See, e.g., Aaronson et al (2012), Elsby and Shapiro (2012), Mo¢ tt (2012), Sherk (2012), Van Zandweghe (2012), Erceg and Levin (2013), Hotchkiss and Rios-Avila (2013) for recent work on the reasons for the decline in participation. See, e.g., Mortensen and Pissarides (1998), Shimer (1998Shimer ( , 2001), Ball and Mo¢ tt (2002), Hornstein, Krusell, Violante (2007), Pissarides and Vallanti (2007) for recent work on the reasons for long-run movements in unemployment. 2 The aging of the baby boom generation has been proposed to explain the inverse U-shape movement in unemployment since the early 70s (Perry (1970), Flaim (1979), Gordon (1982), , and Shimer (1998Shimer ( , 2001).…”