TY  - JOUR
AU  - Gali,Jordi
TI  - Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5721
PY  - 1996
Y2  - August 1996
UR  - http://www.nber.org/papers/w5721
L1  - http://www.nber.org/papers/w5721.pdf
N1  - Author contact info:
Jordi Gali
Centre de Recerca en Economia Internacional (CREI)
Ramon Trias Fargas 25
08005 Barcelona
SPAIN
Tel: 011-34-93-5422754
Fax: 011-34-93-5421860
E-Mail: jgali@crei.cat
AB  - Using data for the G7 countries, I estimate conditional correlations of employment and productivity, based on a decomposition of the two series into technology and non-technology components.  The picture that emerges is hard to reconcile with the predictions of the standard Real Business Cycle model.  For a majority of countries the following results stand out: (a) technology shocks appear to induce a negative comovement between productivity and employment, counterbalanced by a positive comovement generated by demand shocks, (b) the impulse responses show a persistent decline of employment in response to a positive technology shock, and (c) measured productivity increases temporarily in response to a positive demand shock.  More generally, the pattern of economic fluctuations attributed to technology shocks seems to be largely unrelated to major postwar cyclical episodes.  A simple model with monopolistic competition, sticky prices, and variable effort is shown to be able to account for the empirical findings.
ER  -