Rhythm versus Nature of Technological Change

• Published in: IDEAS Working Paper Series from RePEc
• Main Authors: Carré, Martine, Drouot, David
• Format: Paper
• Language: English
• Published: St. Louis Federal Reserve Bank of St. Louis 01.01.2002
• Subjects: Economic conditions; Learning; Unemployment

An acceleration of the rate of technical change is often deemed responsible for the observed increase of job instability and wage inequality in some industrialised countries during the last 30 years. Numerous articles emphasize the role played by the rate of technical change. But, there has been relatively little attention paid to the question of how the nature of technological progress affects the instability of jobs and unemployment. In this paper, we argue that the introduction of technological improvements within firms is likely to modify the learning process on the job. Then, we examine the consequences of such changes in return to seniority on unemployment rate, job instability and wage dispersion. We conclude that when the rate of technical change increases, the unemployment rate and job instability should increase. But the alteration of the learning process can cancel this effect in a routine world, whereas this alteration amplifies it as jobs go out the routine. In terms of wages dispersion, compared to the existing literature, we show that the effects of the rate of technological change are non monotone, depending on the learning process. Finally, we study the question of diffusion of new technology. We suggest that the decrease of the rate of learning process is a factor which magnifies the effects of a collapse of price.