Speed of Technical Progress and Length of the Average Interjob Period

The mean duration of unemployment approximately doubled in the United States between the early 1950s and the mid-1990s, with most of the increase occurring since the early 1970s. Using a simple model linking the average duration of unemployment with the speed of technical change, and aggregate time-series data, the authors find strong evidence that both the rate of total-factor productivity growth and investment in office, computing, and accounting equipment (OCA) per employee have a significant positive effect on mean unemployment duration. Moreover, literally all of the two-thirds rise in mean unemployment duration between 1971 and 1994 (two similar points in the business cycle) can be attributed to increases in OCA investment.