Macroeconomic Effects of Technological Transition F. Collard, P. F` - PowerPoint PPT Presentation

Macroeconomic Effects of Technological Transition Macroeconomic Effects of Technological Transition F. Collard, P. F` eve & F. Portier April, 03, 2008

Macroeconomic Effects of Technological Transition Motivation Plan Motivation The model Quantitative Evaluation results Reinforcing Network Effects : Ultra broadband results

Macroeconomic Effects of Technological Transition Motivation Motivation ◮ New technologies such as Ultrabroadband technologies are “General Purpose Technologies” ◮ Dramatic change of technology at the aggregate level ◮ Magnified by network effects such technologies trigger ◮ Usually : More capital intensive = ⇒ Potential Macroeconomic effects ◮ Aggregate productivity (and growth) ◮ Sectoral allocation of resources ◮ (Un–)Employment ◮ Welfare ◮ This paper investigates this issue

Macroeconomic Effects of Technological Transition Motivation Motivation ◮ Develop a macroeconomic model of technological change ◮ Growth model with technology adoption ◮ Features ◮ Several sectors ◮ Capital accumulation ◮ Frictions on the labor market : Unemployment ◮ Endogenous technology adoption ◮ Network effects ◮ Estimate the model and derive quantitative implications

Macroeconomic Effects of Technological Transition The model Plan Motivation The model Quantitative Evaluation results Reinforcing Network Effects : Ultra broadband results

Macroeconomic Effects of Technological Transition The model The Model ◮ Dynamic General Equilibrium model ◮ 3 kinds of agents : 1. Households (consume, save supply labor) 2. Firms (Produce goods, use capital and labor, decide on technology) 3. Government (unemployment spells)

Macroeconomic Effects of Technological Transition The model The Model : Households ◮ Continuum of households with finite (but uncertain) lifetime (Constant Population) ◮ Beginning of each period, told whether he/she will survive (prob 1- ψ ) ◮ If drawn, he/she will be employed and will get the wage, if not will be unemployed and will get unemployment spells. ◮ Decide on consumption and labor supply so as to maximize expected lifetime preferences � � ∞ ∞ ρ s (1 − ψ ) s log( c t + s ) + ρ s ψ (1 − ψ ) s − 1 log( d t + s ) U t = s =0 s =1

Macroeconomic Effects of Technological Transition The model The Model : Firms ◮ 2 types of firms ◮ Those producing “intermediate” goods in each sector by means of capital and labor. ◮ Those producing the final good, Y t , by combining intermediate goods � n � 1 � ε ζ 1 − ε Q ε Y t = i i , t i =1 ◮ the final good can be consumed or invested to form capital K t +1 = I t + (1 − δ ) K t

Macroeconomic Effects of Technological Transition The model The Model : Sectoral Firms ◮ n sectors with a representative firm that produces a specific good by means of capital and labor ◮ May use 2 technologies Q 1 , i , t = K α i i , t (Θ t L i , t ) 1 − α i Q 2 , i , t = Φ i , t K β i i , t (Θ t L i , t ) 1 − β i where 0 � α � β � 1. Θ t : Harrod neutral technological progress ◮ Φ t > 0 measure the differential productivity b/w the 2 technologies

Macroeconomic Effects of Technological Transition The model The Model : Sectoral Firms ◮ Either, the old technology is implemented : Q i , t = Q 1 , i , t = K α i i , t (Θ t L i , t ) 1 − α i ◮ Or only the new technology is implemented : Q i , t = Q 2 , i , t = Φ i , t K β i i , t (Θ t L i , t ) 1 − β i ◮ Or a technology mix (Partial Adoption) Q i , t = ( σ i , t K i , t ) α i ( ν i , t Θ t L i , t ) 1 − α i +Φ i , t ((1 − σ i , t ) K i , t ) β i ((1 − ν i , t )Θ t L i , t ) 1 − β i

Macroeconomic Effects of Technological Transition The model The Model : Sectoral Firms ◮ Evolution of Differential productivity Φ i , t = γ ϕ i , t Φ i , t − 1 ◮ A stochastic rate of technology improvements � γ ϕ with proba. π t γ ϕ i i , t = 0 with proba.1 − π t ◮ Time–varying probability π t = ρ π π t − 1 + π ⋆ ( ς k , t ) with | ρ π | < 1 ◮ Network effects π ⋆ ( ς k , t ) = (1 − ̟ 0 ) ς k , t − ς 1+ ̟ 1 + ̟ 0 with ̟ 0 , ̟ 1 > 0 k , t

Macroeconomic Effects of Technological Transition The model The Model : Sectoral Firms Technology Adoption ◮ Firms decides on capital, labor, vacancies posting labor and technology maximizing profits p q , i , t Q i , t − p k , i , t K i , t − W i , t L i , t ◮ Technology adoption depends on prices, and the capital labor ratio in each sector

Macroeconomic Effects of Technological Transition The model Technology Adoption y t q 2 , t q 1 , t k t (Φ t ) k t k t (Φ t )

Macroeconomic Effects of Technological Transition The model Technology Adoption y t q 2 , t q 1 , t k t (Φ t ) k t k t (Φ t )

Macroeconomic Effects of Technological Transition The model The Model : Labor Market ◮ Assumption : It is costly to find a job (worker) or fill a position (firms) ◮ Captured by the so–called “matching function” ζ 1 − ζ L t = M ( U t , V t ) ≡ m 0 U t V avec 0 < ζ < 1 t Beyond the control of any economic agent. ◮ Creates congestion externalities, and unemployment.

Macroeconomic Effects of Technological Transition The model General Equilibrium An equilibrium of this economy is a sequence of prices {P t } ∞ t =0 = { r t , W t , p k , t } ∞ t =0 and a sequence of quantities {Q t } ∞ t =0 = { c t , d t , a t , C t , A t , I t , K t +1 , Y t , Θ t L t , σ t , ν t } ∞ t =0 such that (i) Given {P t } ∞ t =0 , {Q t } ∞ t =0 solves the household program ; (ii) Given {P t } ∞ t =0 , {Q t } ∞ t =0 solves the program of each firm ; (iii) Given {Q t } ∞ t =0 , {P t } ∞ t =0 clear the markets (iv) Equilibrium unemployment

Macroeconomic Effects of Technological Transition Quantitative Evaluation Plan Motivation The model Quantitative Evaluation results Reinforcing Network Effects : Ultra broadband results

Macroeconomic Effects of Technological Transition Quantitative Evaluation Quantitative Evaluation ◮ Quantitative Evaluation on the French economy, 3 main sectors (Agriculture, Manufacturing, Services) ◮ Preferences : Calibrated using previous studies ◮ Labor market : Match the situation of the labor market in the pre 1979 era ◮ Old technology : Match some ratios for the pre 1979 era ( WN / Y , K / Y . . . ) ◮ New Technology : Estimation

Macroeconomic Effects of Technological Transition Quantitative Evaluation Quantitative Evaluation Structural Parameters Θ = ( ̟ 0 , ̟ 1 , ρ, ∆ , γ ϕ i , β i ; i = 1 , . . . , N ) Share of sector i in GDP Simulated data ς s i , t (Θ) y i , t � S T N � � � 1 ς s i , t (Θ) − ς i , t ) 2 min ( � ST Θ s =1 t =1 i =1

Macroeconomic Effects of Technological Transition results Plan Motivation The model Quantitative Evaluation results Reinforcing Network Effects : Ultra broadband results

Macroeconomic Effects of Technological Transition results Evolution of Sectoral Shares Agriculture Industrie Services 5.5 35 80 5 75 Pourcentage Pourcentage Pourcentage 4.5 30 4 70 3.5 25 65 3 2.5 20 60 1980 1990 2000 1980 1990 2000 1980 1990 2000 Années Années Années

Macroeconomic Effects of Technological Transition results Evolution of Sectoral Shares Role of Network Effects Agriculture Industrie Services 5.5 35 75 5 Pourcentage Pourcentage 30 Pourcentage 70 4.5 25 65 4 3.5 20 60 1980 2000 2020 1980 2000 2020 1980 2000 2020 Années Années Années

Macroeconomic Effects of Technological Transition results Evolution of GDP Niveau Taux de croissance 1.5 0.06 0.05 1 0.04 0.03 0.5 0.02 0.01 0 0 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 Années Années

Macroeconomic Effects of Technological Transition results Evolution of probability Probabilité Taux d’adoption 0.8 1.5 0.6 Pourcentage Pourcentage 1 0.4 0.5 0.2 0 0 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 Années Années

Macroeconomic Effects of Technological Transition results Evolution of Sectoral Productivity Agriculture Industrie Services 0.15 0.03 0.08 0.1 0.02 0.06 0.05 0.01 0.04 0 0 0.02 −0.05 −0.01 0 1980 2000 2020 1980 2000 2020 1980 2000 2020 Années Années Années

Macroeconomic Effects of Technological Transition results Evolution of Labor Markets Agriculture Industrie Services 2.5 45 80 40 75 2 Pourcentage Pourcentage Pourcentage 35 70 1.5 30 65 1 25 60 0.5 20 55 1980 2000 2020 1980 2000 2020 1980 2000 2020 Années Années Années

Macroeconomic Effects of Technological Transition results Evolution of Labor Markets Taux de chômage Emploi vacants 7 0.015 6 Pourcentage Pourcentage 5 0.01 4 3 2 0.005 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 Années Années Tension (V/U) Salaire 0.8 1.6 1.4 0.6 Pourcentage Pourcentage 1.2 0.4 1 0.2 0.8 0 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 Années Années

Macroeconomic Effects of Technological Transition results Welfare ◮ Potential Tradeoffs ◮ Accumulate vs Consumption ◮ Short run/long–run (e.g. unemployment) ◮ But in this case : Strong productivity effects due to network externality U t ( C No U t ( C t ) ) x t 6.432178 6.211738 0.246625