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Labor supply, biased technological change and economic growth

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  • HERNANDO ZULETA
  • SANTIAGO ALBERICO

Abstract

We consider a model of factor saving innovations and study the effects of exogenous changes in labor supply. In a biased innovations setting, as economies accumulate capital, labor becomes relatively scarce and expensive. As a consequence, incentives for labor saving and capital using innovations appear. By the same token, exogenous changes in labor supply affect factor prices. In general, a reduction in labor supply decreases current output and generates incentives for labor saving innovations. Therefore, the effect that a change in the supply of labor has on factor prices is mitigated and, depending on the initial conditions, it may be contrasted by the effect of the technological bias. Finally, the movements of the factor prices affect the saving decisions and consequently the dynamics of economic growth. We explore the consequences of an exogenous decrease in labor supply in two different settings: a homogenous agents model with infi nite horizon and an overlapping generations model.

Suggested Citation

  • Hernando Zuleta & Santiago Alberico, 2007. "Labor supply, biased technological change and economic growth," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 25(53), pages 260-286, January.
    • Handle: RePEc:bdr:ensayo:v:25:y:2007:i:53:p:260-286
    DOI: 10.32468/Espe.5306
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    Cited by:

    1. Laura Liliana Moreno Herrera & Jorge Eduardo Pérez Pérez, 2009. "Biased Technological Change, Impatience and Welfare," DEGIT Conference Papers c014_046, DEGIT, Dynamics, Economic Growth, and International Trade.
    2. Xiaoxue Du & Hernan Tejeda & Zhengliang Yang & Liang Lu, 2022. "A General-Equilibrium Model of Labor-Saving Technology Adoption: Theory and Evidences from Robotic Milking Systems in Idaho," Sustainability, MDPI, vol. 14(13), pages 1-17, June.

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    More about this item

    Keywords

    Labor supply; factor income shares; economic growth;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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