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Uneven Technical Progress and Unemployment

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In a two-sector-economy with real wage rigidity, we examine how technical progress in one sector affects aggregate unemployment. We show that aggregate unemployment decreases for uneven technical change in the case of Cobb-Douglas production functions. For every type of technical progress there are also elasticities of substitution in production and utility functions leading to a rise in unemployment. Moreover, we identify polar cases when unemployment strongly decreases.

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Hans Gersbach, Achim Schniewind

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Adapt according to the presented license agreement and reference the original author.