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

Yongsung Chang; Jay H. Hong

doi:10.1257/000282806776157687

American Economic Review Vol. 96 No. 1 2006

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

¹ School of Economics, Seoul National University, Seoul 151-742, Korea, and Federal Reserve Bank of Richmond. · ² Department of Economics, University of Pennsylvania, 3718 Locust Walk, Philadelphia, PA 19104, and Federal Reserve Bank of Philadelphia.

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.

DOI: 10.1257/000282806776157687
Volume: 96
Issue: 1
Pages: 352-368
Language: en
Sources: bibtex:phds-export.bib openalex crossref

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

Abstract

Cite