Three Essays on Technological Change and Labour-Market Dynamics

This thesis examines how innovation and technological change shape aggregate growth and labour-market outcomes, and how policy mediates the attendant trade-offs. The first essay develops a Schumpeterian dynamic general equilibrium model with creative destruction and search-and-matching frictions that distinguishes skilled R&D from unskilled production labour. Calibrated to U.S. data (2003–2019), the model delivers a transparent growth–unemployment trade-off under innovation policy. Both R&D tax credits and direct wage subsidies raise the innovation arrival rate and TFP growth, while increasing separations and steady-state unemployment. Welfare comparisons favour direct R&D wage subsidies: doubling the subsidy from 10% to 20% yields a 1.47% consumption-equivalent gain versus 0.36% for doubling a 6% incremental credit. In contrast, a broad corporate-profit tax cut from 33% to 30% reduces innovation and welfare despite a slight decline in unemployment. The second essay studies within-occupation skill obsolescence. Using vacancy-text-based task measures merged with multidimensional individual skills, it constructs worker-specific exposure to skill obsolescence and shows that higher exposure predicts lower earnings, longer non-employment, and greater occupational mobility. On the other hand, workers whose primary skill becomes obsolete but possess offsetting strengths are more likely to adapt in place. The third essay analyses displaced workers using an event–study difference-in-differences design and finds large, persistent earnings losses concentrated on weeks worked. However, losses are heterogeneous in terms of exposure to skill obsolescence. Non-exposed workers lose about 20% in year one and recover within three years, whereas highly exposed workers lose about 30% and remain below baseline eight years later. Overall, the results support a portfolio of innovation instruments, adjusted to objectives and fiscal constraints, and complemented by adjustment policies for the most exposed, and therefore most vulnerable workers.