Ruhr Economic Papers

Ruhr Economic Papers #806

What Are the Effects of Technology Shocks on International Labor Markets?

by Svetlana Rujin

RUB, RWI, 04/2019, 47 S./p., 8 Euro, ISBN 978-3-86788-934-6 DOI: 10.4419/86788934



How do international labor markets respond to a technology shock and what is the main transmission
channel across countries with different labor market institutions? To answer these questions, I identify
technology shocks using the approach of Galí (1999) and decompose the responses of total hours worked
into movements along the extensive and the intensive margins. Overall, my analysis shows that technology
shocks have a negative effect on total hours. This effect is stronger in countries with flexible labor markets,
where the adjustment takes place along both margins. In contrast, the responses of total hours are smaller
in countries with strict labor market legislation, where labor adjustment takes place along the intensive
margin. These differences can be linked to the strictness of institutions that target quantity and price
adjustments in the labor market.

JEL-Classification: O40, O57, E32, C32

Keywords: Technology shocks; labor markets; business cycle fluctuations; structural identification