Capital accumulation, unemployment, and the putty-clay

Abstract

This note studies the dynamics of labor markets in a putty-clay framework. It analyzes the evolution of job creation and job destruction in an economy without market frictions. Unemployment and labor market flows emerge under putty-clay technologies because low productive jobs become unused factors. As capital accumulates, firms destruct low productive jobs by obsolescence. Simultaneously, the use of capital intensive technologies s new jobs by the low substitution between capital and labor.