Article2006

Do Technological Improvements in the Manufacturing Sector Raise or Lower Employment?

129 citations0/0 files storedAmerican Economic Review

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Labor market dynamics and wage inequality Economic Growth and Productivity Firm Innovation and Growth

Abstract

We find that technology's effect on employment varies greatly across manufacturing industries. Some industries exhibit a temporary reduction in employment in response to a permanent increase in TFP, whereas many more industries exhibit an employment increase in response to a permanent TFP shock. This raises serious questions about existing work that finds a labor productivity shock has a strong negative effect on employment. There are tantalizing and interesting differences between TFP and labor productivity. We argue that TFP is a more natural measure of technology because labor productivity reflects shifts in the input mix as well as in technology.

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References

2019American Economic Review 1988The Dynamic Effects of Aggregate Demand and Supply Disturbances 1996Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations 2004Some Evidence on the Importance of Sticky Prices 1982Time Paths in the Diffusion of Product Innovations 1947Measuring Business Cycles 1997Returns to Scale in U.S. Production: Estimates and Implications 2002Some Evidence on the Importance of Sticky Prices

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