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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 infinite horizon and an overlapping generations model.***************************************************************************************************************Se utiliza un modelo de innovaciones sesgadas para estudiar los efectos de cambios exógenos en la oferta laboral. En un contexto de innovaciones sesgadas, a medida que las economías acumulan capital, el trabajo se hace relativamente más escaso y más caro, por este motivo, hay incentivos para adoptar tecnologías ahorradoras de trabajo. Del mismo modo un cambio en la oferta laboral afecta la abundancia de factores y sus precios relativos. En general, una reducción de la oferta laboral, hace que el trabajo sea más caro y genera incentivos para cambio tecnológico ahorrador de trabajo. Así, el efecto inicial que tiene el cambio en la oferta laboral sobre los precios de los factores es mitigado por el cambio tecnológico. Finalmente, los movimientos en la remuneración a los factores afectan las decisiones de ahorro y, por lo tanto, la dinámica del crecimiento.En este trabajo se exploran las consecuencias de una reducción de la oferta laboral en dos contextos teóricos diferentes: un modelo de agentes homogéneos y horizonte infinito y un modelo de generaciones traslapadas.

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Paper provided by UNIVERSIDAD DEL ROSARIO in its series DOCUMENTOS DE TRABAJO with number 003104.

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Length: 27
Date of creation: 01 Mar 2007
Date of revision:
Handle: RePEc:col:000092:003104

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

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  1. Caselli, Francesco & Feyrer, James, 2005. "The Marginal Product of Capital," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5203, C.E.P.R. Discussion Papers.
  2. Boldrin, Michele & Levine, David, 2002. "Factor Saving Innovation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3262, C.E.P.R. Discussion Papers.
  3. 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, American Economic Association, vol. 90(1), pages 282-291, March.
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  5. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(4), pages 715-730, August.
  6. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(4), pages 1091-1117, November.
  7. Alan Krueger, 1999. "Measuring Labor's Share," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 792, Princeton University, Department of Economics, Industrial Relations Section..
  8. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report, Federal Reserve Bank of Minneapolis 239, Federal Reserve Bank of Minneapolis.
  9. 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, University of Chicago Press, vol. 98(5), pages 1008-38, October.
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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, DEGIT, Dynamics, Economic Growth, and International Trade c014_046, DEGIT, Dynamics, Economic Growth, and International Trade.

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