Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 2/2021: Jobs and technology in general equilibrium: A three-elasticities approach

Richard Baldwin , Jan I. Haaland () and Anthony J. Venables ()
Additional contact information
Richard Baldwin: Graduate Institute, Geneva
Jan I. Haaland: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Anthony J. Venables: The Productivity Institute University of Manchester, and Monash University

Abstract: The impact of technological progress on jobs and wages has been subject to much empirical and some theoretical work. However, most of this literature has not addressed the general equilibrium interplay between the productive factors that are affected, the sectors in which these factors are used, and the consequent changes in the structure of employment and factor returns. This paper draws on tools from general equilibrium trade theory to provide an integrated approach to these issues. The analysis centres around three key elasticities linking technological change to jobs – the jobs-displacing substitution effect, the job-creating demand effect, and the general-equilibrium effects, through which factors are reallocated between sectors. The results highlight the role of relative factor intensities and the importance of openness in determining the effects of technology on jobs, wages, and structural change. The implications of interaction between non-tradable and tradable sectors are analysed.

Keywords: Technical change; wages; employment; factor intensity

JEL-codes: F11; F16; J30; O33

26 pages, January 21, 2021

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