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Do technological improvements in the manufacturing sector raise or lower employment?

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  • Yongsung Chang
  • Jay H. Hong

Abstract

We find that technology's effect on employment varies greatly across manufacturing industries. Some industries exhibit a temporary reduction in employment in response to a permanent increase in TFP, whereas far more industries exhibit an employment increase in response to a permanent TFP shock. This raises serious questions about existing work that finds that a labor productivity shock has a strong negative effect on employment. There are tantalizing and interesting differences between TFP and labor productivity. We argue that TFP is a more natural measure of technology because labor productivity reflects shifts in the input mix as well as in technology.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 05-5.

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Date of creation: 2005
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Handle: RePEc:fip:fedpwp:05-5

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Keywords: Technology - Economic aspects ; Manufactures ; Employment;

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