IDEAS home Printed from https://ideas.repec.org/a/tei/journl/v10y2017i1p42-48.html
   My bibliography  Save this article

On Risk Induced by Technical Change

Author

Listed:
  • Burak Ünveren

    (Yıldız Teknik Üniversitesi, İİBF, Davutpaşa Campus, İstanbul, Turkey)

Abstract

Purpose: The purpose of this paper is to analyze the efficiency loss due to incomplete financial markets when risk is induced by technological uncertainty. Design/methodology/approach: A worker-capitalist general equilibrium model is developed. It is assumed that future technical change is a stochastic event, causing uncertainty in future relative prices. Then the model is calibrated to the US data. Findings: Our first finding is theoretical: The competitive equilibrium is Pareto-inefficient. Then we numerically calculate the taxes that make all individuals better-off at the calibrated parameter values. The results clearly show how the burden of taxation should be shared among workers and capitalists when the government uses redistribution of income as a tool of mitigating the loss of efficiency due to technological shocks. Research limitations/implications: The model is obviously a stripped-down version of reality, and hence, the results should be taken with a grain of salt as the numerical computations would be definitely sensitive to certain rich details of real life that are neglected in this study. Originality/value: The results show that the total amount of employment and production are not affected by optimal taxation, which is a surprising result. Indeed, the inefficiency is primarily caused by the distribution of labor supply among individuals. The optimal taxes are also numerically computed.

Suggested Citation

  • Burak Ünveren, 2017. "On Risk Induced by Technical Change," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 10(1), pages 42-48, March.
    • Handle: RePEc:tei:journl:v:10:y:2017:i:1:p:42-48
    as

    Download full text from publisher

    File URL: http://ijbesar.teiemt.gr/docs/volume10_issue1/risk_induced_technical_change.pdf
    Download Restriction: no
    File URL: http://ijbesar.teiemt.gr/volume10_issue1.php
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Antràs Pol, 2004. "Is the U.S. Aggregate Production Function Cobb-Douglas? New Estimates of the Elasticity of Substitution," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-36, April.
    2. Atsushi Kajii & Antonio Villanacci & Alessandro Citanna, 1998. "Constrained suboptimality in incomplete markets: a general approach and two applications," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 495-521.
    3. Frey, Carl Benedikt & Osborne, Michael A., 2017. "The future of employment: How susceptible are jobs to computerisation?," Technological Forecasting and Social Change, Elsevier, vol. 114(C), pages 254-280.
    4. Felix Reichling & Charles Whalen, 2012. "Review of Estimates of the Frisch Elasticity of Labor Supply: Working Paper 2012-13," Working Papers 43676, Congressional Budget Office.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. ADACHI Daisuke & KAWAGUCHI Daiji & SAITO Yukiko, 2020. "Robots and Employment: Evidence from Japan, 1978-2017," Discussion papers 20051, Research Institute of Economy, Trade and Industry (RIETI).
    2. Brent Neiman, 2014. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 61-103.
    3. Loebbing, Jonas, 2018. "An Elementary Theory of Endogenous Technical Change and Wage Inequality," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181603, Verein für Socialpolitik / German Economic Association.
    4. Basso, Henrique S. & Jimeno, Juan F., 2021. "From secular stagnation to robocalypse? Implications of demographic and technological changes," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 833-847.
    5. Iftekhairul Islam & Fahad Shaon, 2020. "If the Prospect of Some Occupations Are Stagnating With Technological Advancement? A Task Attribute Approach to Detect Employment Vulnerability," Papers 2001.02783, arXiv.org.
    6. Kristy Fan & Tyler J. Fisher & Andrew A. Samwick, 2021. "The Insurance Value of Financial Aid," NBER Working Papers 28669, National Bureau of Economic Research, Inc.
    7. Stieglitz, Moritz & Setzer, Ralph, 2022. "Firm-level employment, labour market reforms, and bank distress," Journal of International Money and Finance, Elsevier, vol. 120(C).
    8. Ayhan, Fatih & Elal, Onuray, 2023. "The IMPACTS of technological change on employment: Evidence from OECD countries with panel data analysis," Technological Forecasting and Social Change, Elsevier, vol. 190(C).
    9. Caroline Lloyd & Jonathan Payne, 2021. "Fewer jobs, better jobs? An international comparative study of robots and ‘routine’ work in the public sector," Industrial Relations Journal, Wiley Blackwell, vol. 52(2), pages 109-124, March.
    10. Gilberto Santos & Jose Carlos Sá & Maria João Félix & Luís Barreto & Filipe Carvalho & Manuel Doiro & Kristína Zgodavová & Miladin Stefanović, 2021. "New Needed Quality Management Skills for Quality Managers 4.0," Sustainability, MDPI, vol. 13(11), pages 1-22, May.
    11. P. Herings & Herakles Polemarchakis, 2005. "Pareto improving price regulation when the asset market is incomplete," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(1), pages 135-154, January.
    12. Matthew Rognlie & Andrei Shleifer & Alp Simsek, 2018. "Investment Hangover and the Great Recession," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 113-153, April.
    13. Sergio Turner, 2004. "Pareto Improving Taxation in Incomplete Markets," Econometric Society 2004 Latin American Meetings 310, Econometric Society.
    14. Grinis, Inna, 2017. "The STEM requirements of "non-STEM" jobs: evidence from UK online vacancy postings and implications for skills & knowledge shortages," LSE Research Online Documents on Economics 85123, London School of Economics and Political Science, LSE Library.
    15. Mario Tirelli, 2003. "Income taxation when markets are incomplete," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 26(2), pages 97-128, November.
    16. van den Broek, Tijs & van Veenstra, Anne Fleur, 2018. "Governance of big data collaborations: How to balance regulatory compliance and disruptive innovation," Technological Forecasting and Social Change, Elsevier, vol. 129(C), pages 330-338.
    17. Daniele Checchi & Cecilia García‐Peñalosa, 2010. "Labour Market Institutions and the Personal Distribution of Income in the OECD," Economica, London School of Economics and Political Science, vol. 77(307), pages 413-450, July.
    18. Daniele Angelini, 2023. "Aging Population and Technology Adoption," Working Paper Series of the Department of Economics, University of Konstanz 2023-01, Department of Economics, University of Konstanz.
    19. Caitlin Allen Whitehead & Haroon Bhorat & Robert Hill & Tim Köhler & François Steenkamp, 2021. "The Potential Employment Implications of the Fourth Industrial Revolution Technologies: The Case of the Manufacturing, Engineering and Related Services Sector," Working Papers 202106, University of Cape Town, Development Policy Research Unit.
    20. Sony, Michael & Aithal, Sreeramana, 2020. "Transforming Indian Engineering Industries through Industry 4.0: An Integrative Conceptual Analysis," MPRA Paper 102872, University Library of Munich, Germany.

    More about this item

    Keywords

    Incomplete markets; Constrained efficiency; redistribution;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tei:journl:v:10:y:2017:i:1:p:42-48. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kostas Stergidis (email available below). General contact details of provider: https://edirc.repec.org/data/dbikagr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.