Information and Communication Technology as Technical Change in Matching and Production Thomas Ziesemer Received August 31, 2001, revised version received June 25, 2002 Published online: April 30, 2003 Ó Springer-Verlag 2003 In this paper, we integrate two workhorse models in economics: The monopo- listic competition model of Dixit and Stiglitz and the search unemployment model of Pissarides. Information and communication technology (ICT) is inter- preted as a (i) technical progress in the matching function of the Pissarides labor market search model, where it is increasing the probability of filling a vacancy, and (ii) technical change in the production function of the Dixit-Stiglitz goods market model where it is increasing fixed costs and decreasing variable costs. All effects together, modeled as a permanent once-and-for-all ICT and internet shock, increase the vacancy/unemployment ratio, decrease the long-run equilibrium unemployment rate, and increase wages. Keywords: ICT, monopolistic competition, unemployment. JEL classification: O33, E13, E24. 1 Introduction In the 1980s labor intermediaries started to use computers in the search process to find employees. Profiles of potential employees were entered into computer databases, as were employers’ vacancies. A similar process takes place using the internet. Public and private intermediaries have set up websites for job searches. These measures are expected to improve the chances of employers and workers to find a job in exchange for amounts of time or money invested into a search 1 . The OECD (1997) expressed 1 See Autor (2001). Vol. 79 (2003), No. 3, pp. 263–287 DOI 10.1007/s00712-002-0583-4