The Dynamics of Technological Unemployment

This article compares the short- and long-run effects of technological progress on employment. It presents a simple model of frictional unemployment capturing the negative creative destruction effects of technological change on employment. In the long run, faster technological change accelerates job obsolescence, which reduces the equilibrium level of employment. But it is also shown to have short-run positive and potentially important effects on employment. This tends to partially reconcile the "Schumpeterian" view of the effects of technological change on labor markets with facts such as the response of most OECD unemployment rates to the 1970s productivity slowdown. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association