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Technology and Labor Regulations

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  • Joeph Zeira
  • Alberto Alesina

Abstract

Many low skilled jobs have been substituted away for machines in Europe, or eliminated, much more so than in the US, while technological progress at the "top", i.e. at the high-tech sector, is faster in the US than in Europe. This paper suggests that the main difference between Europe and the US in this respect is their different labor market policies. European countries reduce wage flexibility and inequality through a host of labor market regulations, like binding minimum wage laws, permanent unemployment subsidies, firing costs, etc. Such policies create incentives to develop and adopt labor saving capital intensive technologies at the low end of the skill distribution. At the same time technical change in the US is more skill biased than in Europe, since American skilled wages are higher. In the last few years some partial labor market reforms in Europe may have started to slow down or even reverse this trend.
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Suggested Citation

  • Joeph Zeira & Alberto Alesina, 2007. "Technology and Labor Regulations," Working Papers 0729, University of Crete, Department of Economics.
    • Handle: RePEc:crt:wpaper:0729
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    Cited by:

    1. Lorenzo Cappellari & Carlo Dell’Aringa & Marco Leonardi, 2012. "Temporary Employment, Job Flows and Productivity: A Tale of Two Reforms," Economic Journal, Royal Economic Society, vol. 122(562), pages 188-215, August.
    2. Armanda Cetrulo & Valeria Cirillo & Dario Guarascio, 2018. "Weaker jobs, weaker innovation. Exploring the temporary employment-product innovation nexus," LEM Papers Series 2018/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Nidhiya Menon, 2010. "Obstacles to Business, Technology Use, and Firms with Female Principal Owners in Kenya," Working Papers 20, Brandeis University, Department of Economics and International Business School.
    4. Zsófia L. Bárány, 2016. "The Minimum Wage and Inequality: The Effects of Education and Technology," Journal of Labor Economics, University of Chicago Press, vol. 34(1), pages 237-274.
    5. Paulo G. Correa & Ana M. Fernandes & Chris J. Uregian, 2010. "Technology Adoption and the Investment Climate: Firm-Level Evidence for Eastern Europe and Central Asia," The World Bank Economic Review, World Bank, vol. 24(1), pages 121-147, January.
    6. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2016. "Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy," Economic Journal, Royal Economic Society, vol. 126(595), pages 1798-1822, September.
    7. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09i8hjg0kpi is not listed on IDEAS
    8. Amin, Mohammad, 2009. "Are labor regulations driving computer usage in India's retail stores?," Economics Letters, Elsevier, vol. 102(1), pages 45-48, January.
    9. Daron Acemoglu, 2010. "When Does Labor Scarcity Encourage Innovation?," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1037-1078.
    10. Eric J. Bartelsman & Pieter A. Gautier & Joris De Wind, 2016. "Employment Protection, Technology Choice, And Worker Allocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(3), pages 787-826, August.
    11. Zsofia Barany, 2011. "The minimum wage and inequality - the effects of education and technology," SciencePo Working papers hal-01069474, HAL.
    12. repec:hal:spmain:info:hdl:2441/4jgjdlef848r49dq2dv8go26r7 is not listed on IDEAS
    13. Tianyuan Luo & Genti Kostandini, 2022. "Stringent immigration enforcement and responses of the immigrant‐intensive sector: Evidence from E‐Verify adoption in Arizona," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(4), pages 1411-1434, August.
    14. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2010. "The effects of employment protection legislation and financial market imperfections on investment: evidence from a firm-level panel of EU countries [Technology and labour regulations]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 25(61), pages 117-163.
    15. Nidhiya Menon, 2010. "Got Technology? The Impact of Computers and Cell-phones on Productivity in a Difficult Business Climate: Evidence from Firms with Female Owners in Kenya," Working Papers 21, Brandeis University, Department of Economics and International Business School.
    16. Berdugo, Binyamin & Hadad, Sharon, 2008. "How Do Firing Costs Affect Innovation and Growth when Workers' Ability is Unknown? – Employment Protection as a Burden on a Firm's Screening Process," MPRA Paper 11410, University Library of Munich, Germany.
    17. Binyamin Berdugo & Sharon Hadad, 2008. "How Do Firing Costs Affect Innovation And Growth When Workers’ Ability Is Unknown – Employment Protection As A Burden On A Firm’S Screening Process," Working Papers 0812, Ben-Gurion University of the Negev, Department of Economics.
    18. Bental, Benjamin & Demougin, Dominique, 2010. "Declining labor shares and bargaining power: An institutional explanation," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 443-456, March.
    19. Zsofia Barany, 2016. "The Minimum Wage and Inequality: The Effects of Education and Technology," SciencePo Working papers hal-03594158, HAL.
    20. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09i8hjg0kpi is not listed on IDEAS
    21. Hery Ferdinan, 2013. "The impact of technological growth on economic performance in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 5(1), pages 15-24, April.
    22. Binyamin Berdugo & Sharon Hadad, 2008. "How Do Firing Costs Affect Innovation and Growth when Workers' Ability is Unknown? – Employment Protection as a Burden on a Firm's Screening Process," DEGIT Conference Papers c013_004, DEGIT, Dynamics, Economic Growth, and International Trade.
    23. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09i8hjg0kpi is not listed on IDEAS
    24. Hristos Doucouliagos & Patrice Laroche, 2013. "Unions and Innovation: New Insights From the Cross-Country Evidence," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 52(2), pages 467-491, April.
    25. Barbosa, Natália & Faria, Ana Paula, 2011. "Innovation across Europe: How important are institutional differences?," Research Policy, Elsevier, vol. 40(9), pages 1157-1169.

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    More about this item

    Keywords

    Skilled jobs; wage differential; technical change;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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