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When Does Labor Scarcity Encourage Innovation?

  • Daron Acemoglu

This paper studies whether labor scarcity encourages technological advances, that is, technology adoption or innovation, for example, as claimed by Habakkuk in the context of nineteenth-century United States. I define technology as strongly labor saving if technological advances reduce the marginal product of labor and as strongly labor complementary if they increase it. I show that labor scarcity encourages technological advances if technology is strongly labor saving and will discourage them if technology is strongly labor complementary. I also show that technology can be strongly labor saving in plausible environments but not in many canonical macroeconomic models.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 118 (2010)
Issue (Month): 6 ()
Pages: 1037 - 1078

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Handle: RePEc:ucp:jpolec:doi:10.1086/658160
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