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Macroeconomics, 4/e
CHAPTER 13
CHAPTER13
Technological
Progress, Wages,
and
Unemployment
Olivier
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An increase in
productivity shifts the
aggregate supply curve
down. It has an
ambiguous effect on the
aggregate demand
curve, which may shift
to the left or to the right.
In this figure, we
assume a shift to the
right.
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Figure 13 - 3
U.S. Labor
Productivity and
Output Growth
since 1960
There is a strong
positive relation
between output
growth and
productivity growth.
But the causality
runs from output
growth to
productivity growth,
not the other way
around.
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W
P r ic e s e ttin g P (1 )
A
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W a g e s e ttin g
W A e P eF (u ,z)
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W
A
P
1
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W
A F (u ,z)
P
The real wage rate depends on both the level of
productivity and the unemployment rate.
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Figure 13 - 4
The Effects of an
Increase in
Productivity on the
Natural Rate of
Unemployment
An increase in
productivity shifts both
the wage- and the pricesetting curves by the
same proportion, and
thus has no effect on
the natural rate of
unemployment.
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Figure 13 - 5
Productivity Growth
and Unemployment
Averages by Decade
since 1890
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Figure 13 - 6
The Effects of a
Decrease in Productivity
Growth on the
Unemployment Rate
When Expectations of
Productivity Growth
Adjust Slowly
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1997
1998
1999
2000
2001
2002
2003
2.7
4.4
4.2
4.4
3.7
0.5
2.2
3.1
5.4
4.9
4.5
4.2
4.0
4.8
5.8
6.0
1.9
1.9
1.1
1.4
2.2
2.4
1.5
1.7
1.8
2.2
2.2
2.4
2.6
0.7
3.9
3.4
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13-3
Technological Progress
and Distribution Effects
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Figure 13 - 7
Evolution of Relative
Wages, by Education
Level. (1973 = 1.0)
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European Unemployment,
Productivity Growth, and
Technological Change
Figure 1
European
Unemployment
and Inflation,
1970-2003
Today, inflation
is roughly stable
in Europe. This
suggests that
the high rate of
unemployment
reflects a high
natural rate of
unemployment.
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European Unemployment,
Productivity Growth, and
Technological Change
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European Unemployment,
Productivity Growth, and
Technological Change
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European Unemployment,
Productivity Growth, and
Technological Change
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Key Terms
technological
unemployment
structural change
jobless recovery
creative destruction
churning
skill-biased technological progress
hysteresis
eurosclerosis
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