Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301340 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11214
Publisher: 
CESifo GmbH, Munich
Abstract: 
I construct and analyze a growth model in which technical change can increase unemployment. I first analyze the forces that deliver a constant steady state unemployment rate in this setting. Labor-saving technical change increases unemployment, which lowers wages and creates incentives for future investment in labor-using technologies. In the long run, this interaction generates a balanced growth path that is observationally equivalent to that of the standard neoclassical growth model, except that it also incorporates a positive steady state level of unemployment and a falling relative price of investment. I also study the effects of a permanent increase in the ability of R&D to improve labor-saving technologies. In the long run, this change leads to faster growth in output per worker and wages, but it also yields higher unemployment and a lower labor share of income. In the short run, this change exacerbates existing inefficiencies and slows economic growth.
Subjects: 
growth
unemployment
directed technical change
JEL: 
E24
O33
O40
Document Type: 
Working Paper
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