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This paper extends the now familiar Shapiro-Stiglitz (1984) model of labor market behavior to reconsider the controversial proposition that some forms of innovation have persistent displacement effects. In particular, it finds that when distinctions between random production failures and reduced effort level are difficult to draw, the adoption f new methods of production that compel more effort, break down more often and/or allow for closer supervision will sometimes induce technological joblessness. The possible magnitude of such dislocation, its welfare effects and the possibilities for invention are then discussed in detail.

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