Technological Progress and Unemployment : Composition of Heterogeneous Multiworker Firms

This study investigates the effects of embodied technological progress on unemployment using a search-matching model with heterogeneous multiworker firms. New technology creates two firm types: those that become obsolete and those that reap the technological rewards. I develop a model in which technological change accelerates firm obsolescence but also encourages aggregate technology adoption. A benchmark simulation shows that technological progress negatively impacts unemployment, as supported by recent estimates. This result is attributable mainly to a change in surviving firms' composition rather than to the conventional effects within each firm. The interaction with product-market competition is also studied