Technological change, employment and wages

Topic 4 -Technological change, employment and wages P Cahuc and A Zylberberg (2004) Labor Economics , Chapter 10: Technological Progress, Globalization and Inequalities, parts 2 and 3. C Greenhalgh and M Rogers (2010) Innovation, Intellectual Property and Economic Growth , Chapter 10: Technology, Wages and Jobs, Princeton University Press. Hornstein, A., P. Krusell and G. L. Violante (2005), 'The effects of technical change on labor market inequalities', in Handbook of Economic Growth, Volume 1B , P. Aghion and S. Durlauf, (eds.), Amsterdam: North Holland/Elsevier B.V. Professor Christine Greenhalgh

Does new technology destroy jobs? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Innovation to create demand ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Labour augmenting technological progress with two factors ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What happens to demand for labour as its efficiency improves? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Effects of Δ A (labour augmenting) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Employment growth and innovation in firms in Europe 1998-2000 Source: Table 10.1 of Greenhalgh and Rogers drawn from Harrison et al. NBER WP 14216 (2008) 5.4 6.5 7.6 8.0 Product innovation 0.2 0.0 0.1 - 0.1 Process innovation 16.1 25.9 10.2 15.5 Services employment growth 4.8 7.4 8.0 5.5 Product innovation - 0.4 0.3 - 0.6 - 0.1 Process innovation 6.7 14.2 5.9 8.3 Manufacturing employment growth UK Spain Germany France

Features of this data from Community Innovation Survey ,[object Object],[object Object],[object Object],[object Object],[object Object]

Time series empirical evidence about innovation and employment ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Innovation and wages in firms – micro aspects ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Innovation and wages - evidence ,[object Object],[object Object],[object Object],[object Object]

Unions and innovation - theory ,[object Object],[object Object],[object Object],[object Object],[object Object]

Unions and innovation – evidence ( Summarised in Greenhalgh and Rogers Ch 10) ,[object Object],[object Object],[object Object],[object Object],[object Object]

Innovation, jobs and wages - the macro picture Source: Table 10.1 of Greenhalgh and Rogers drawn from Machin (2001) Ox Bull Ec & Stats Vol 63 Special Issue 1.64 1.66 17.2 27.5 2000 1.60 1.55 10.2 23.8 1990 1.48 1.36 5.0 19.3 1980 Relative wages of graduates to non-graduates US UK Share of graduates in total employment (%) US UK

Change in ratio of earnings at the median to bottom decile (D5/D1) Source: Cahuc and Zylberberg Table 10.2 0.27 2.20 1.93 US 0.22 1.80 1.58 UK 0.02 1.60 1.58 Japan – 0.06 1.46 1.52 Germany – 0.08 1.60 1.68 France Change Mid 1990s Late 1970s

Reasons for the shift in demand towards the skilled workers ,[object Object],[object Object],[object Object],[object Object],[object Object]

Relative wages, differential productivity and supply growth ,[object Object],[object Object],[object Object],[object Object],[object Object],(Source: Katz and Murphy 1992, in Hornstein 2005)

Predictions of simple model for relative wage of skilled/unskilled ,[object Object],[object Object],[object Object],[object Object],[object Object]

Model with two types of labour and capital equipment ,[object Object],[object Object],[object Object],[object Object],Source: Hornstein, or see Greenhalgh and Rogers

Predictions of three-input model for relative wages of skilled/unskilled ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Globalization - Is international trade also skill biased? ,[object Object],[object Object],[object Object],[object Object],[object Object]

Demand - A third cause of skill bias? ,[object Object],[object Object],[object Object],[object Object],[object Object]

Three causes of skill bias in demand for labour, UK 1979-90 Source: Greenhalgh and Rogers Table 10.3, from Gregory et al. Oxford Economic Papers, 2001 – 13.7 – 4.8 22.0 3.5 Total change – 27.1 – 5.7 17.9 – 14.9 Low skill – 16.2 – 4.8 21.1 0.1 Intermediate skill 4.6 – 4.1 28.2 28.8 High skill Technological change Net exports Final demand Total % change in employment

Implications of these empirics ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Technological change, employment and wages

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Technological change, employment and wages