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. 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.
    2. 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.
    3. 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.
    4. 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.
    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. 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.
    3. 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.
    4. Stieglitz, Moritz & Setzer, Ralph, 2022. "Firm-level employment, labour market reforms, and bank distress," Journal of International Money and Finance, Elsevier, vol. 120(C).
    5. 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.
    6. 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.
    7. 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.
    8. Sergio Turner, 2004. "Pareto Improving Taxation in Incomplete Markets," Econometric Society 2004 Latin American Meetings 310, Econometric Society.
    9. Czarnitzki, Dirk & Fernández, Gastón P. & Rammer, Christian, 2023. "Artificial intelligence and firm-level productivity," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 188-205.
    10. Thanos Fragkandreas, 2022. "Three Decades of Research on Innovation and Inequality: Causal Scenarios, Explanatory Factors, and Suggestions," Working Papers 60, Birkbeck Centre for Innovation Management Research, revised Feb 2022.
    11. Singh, Anuraag & Triulzi, Giorgio & Magee, Christopher L., 2021. "Technological improvement rate predictions for all technologies: Use of patent data and an extended domain description," Research Policy, Elsevier, vol. 50(9).
    12. Montse Gomendio, 2023. "The Level of Skills in Spain: How to Solve the Puzzle using International Surveys," Studies on the Spanish Economy eee2023-35, FEDEA.
    13. Michelle Rendall, 2011. "The Service Sector and Female Market Work: Europe vs US," 2011 Meeting Papers 778, Society for Economic Dynamics.
    14. María Jesús Rosado-García & Renata Kubus & Ramón Argüelles-Bustillo & María Jesús García-García, 2021. "A New European Bauhaus for a Culture of Transversality and Sustainability," Sustainability, MDPI, vol. 13(21), pages 1-22, October.
    15. Gianluca MISURACA & Colin van Noordt, 2020. "AI Watch - Artificial Intelligence in public services: Overview of the use and impact of AI in public services in the EU," JRC Research Reports JRC120399, Joint Research Centre (Seville site).
    16. Dario Cords & Klaus Prettner, 2022. "Technological unemployment revisited: automation in a search and matching framework [The future of work: meeting the global challenges of demographic change and automation]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 115-135.
    17. Restrepo-Echavarria, Paulina, 2019. "Endogenous borrowing constraints and stagnation in Latin America," Journal of Economic Dynamics and Control, Elsevier, vol. 109(C).
    18. John Burgess & Julia Connell, 2020. "New technology and work: Exploring the challenges," The Economic and Labour Relations Review, , vol. 31(3), pages 310-323, September.
    19. Piero Gottardi & Rohit Rahi, 2014. "Value Of Information In Competitive Economies With Incomplete Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(1), pages 57-81, February.
    20. Anton Korinek & Joseph E. Stiglitz, 2018. "Artificial Intelligence and Its Implications for Income Distribution and Unemployment," NBER Chapters, in: The Economics of Artificial Intelligence: An Agenda, pages 349-390, National Bureau of Economic Research, Inc.

    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.