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Labor Supply,Biased Technological Changeand 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 la-bor saving and capital using innovations appear. By the same token, exogenous changes in labor supply affect factor prices. In general, a reduction in la-bor 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 de-crease in labor supply in two different settings: a homogenous agents model with infi nite horizon and an overlapping generations model

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Article provided by BANCO DE LA REPÚBLICA - ESPE in its journal ENSAYOS SOBRE POLÍTICA ECONÓMICA.

Volume (Year): (2007)
Issue (Month): ()
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Handle: RePEc:col:000107:004636

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Keywords: Labor supply; factor income shares; economic growth.;

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  1. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  2. Michele Boldrin & David K Levine, 2001. "Factor Saving Innovation," Levine's Working Paper Archive 625018000000000088, David K. Levine.
  3. Alan B. Krueger, 1999. "Measuring Labor's Share," American Economic Review, American Economic Association, vol. 89(2), pages 45-51, May.
  4. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  5. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 715-730, August.
  6. Francesco Caselli & James Feyrer, 2005. "The Marginal Product of Capital," NBER Working Papers 11551, National Bureau of Economic Research, Inc.
  7. Olivier de La Grandville & Rainer Klump, 2000. "Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions," American Economic Review, American Economic Association, vol. 90(1), pages 282-291, March.
  8. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  9. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
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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.

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