The Impact of Disembodied Technological Progress on Unemployment

This paper studies the relationship between disembodied technological progress and unemployment in a standard search-matching model. We find that the sign of the correlation crucially depends on the degree of idiosyncratic uncertainty. The analysis uncovers a new effect whereby an increase in growth intensifies the endogenous rate of job separation because it raises the workers' outside option. For plausible parameter values, the outside option effect outweighs the capitalization effect, so that disembodied technological progress increases the rate of unemployment. (Copyright: Elsevier)