Does capital-embodied technological change play an important role in shaping labor market outcomes? To address this question, we develop a model with vintage capital and search-matching frictions where irreversible investment in new vintages of capital creates heterogeneity in productivity among...

Andreas Hornstein (Richmond Fed economist and vice president), Per Krusell (economics professor, University of Rochester, and Richmond Fed visiting scholar), and Giovanni L. Violante (assistant professor of economics, New York University) review recent research on a widely used search model of...