Research Topics

Publications on Technical change

There are 2 publications for Technical change.
  • The Relationship between Technical Progress and Employment


    Working Paper No. 946 | February 2020
    A Comment on Autor and Salomons
    We show that Autor and Salomons’ (2017, 2018) analysis of the impact of technical progress on employment growth is problematic. When they use labor productivity growth as a proxy for technical progress, their regressions are quasi-accounting identities that omit one variable of the identity. Consequently, the coefficient of labor productivity growth suffers from omitted-variable bias, where the omitted variable is known. The use of total factor productivity (TFP) growth as a proxy for technical progress does not solve the problem. Contrary to what the profession has argued for decades, we show that this variable is not a measure of technical progress. This is because TFP growth derived residually from a production function, together with the conditions for producer equilibrium, can also be derived from an accounting identity without any assumption. We interpret TFP growth as a measure of distributional changes. This identity also indicates that Autor and Salomons’ estimates of TFP growth’s impact on employment growth are biased due to the omission of the other variables in the identity. Overall, we conclude that their work does not shed light on the question they address.
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    Author(s):
    Jesus Felipe Donna Faye Bajaro Gemma Estrada John McCombie

  • Demand, Distribution, Productivity, Structural Change, and (Secular?) Stagnation


    Working Paper No. 945 | January 2020
    The present paper emphasizes the role of demand, income distribution, endogenous productivity reactions, and other structural changes in the slowdown of the growth rate of output and productivity that has been observed in the United States over the last four decades. In particular, it is explained that weak net export demand, fiscal conservatism, and the increase in income inequality have put downward pressure on demand. Up until the crisis, this pressure was partially compensated for through debt-financed expenditure on behalf of the private sector, especially middle- and lower-income households. This debt overhang is now another obstacle in the way of demand recovery. In turn, as emphasized by the Kaldor-Verdoorn law and the induced technical change approach, the decrease in demand and the stagnation of wages can lead to an endogenous slowdown in productivity growth. Moreover, it is argued that the increasingly oligopolistic and financialized structure of the US economy also contributes to the slowdown. Finally, the paper argues that there is nothing secular about the current stagnation; addressing the aforementioned factors can allow for growth to resume, as has happened in the past.

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