The Effects of Factor Prices and Technological Change on the Occupational Demand for Labor: Evidence from Canadian Telecommunications
This paper investigates the effect of automation on the occupational demand for labor using modern econometric demand theory. We are able to estimate labor demand functions derived from a production process characterized by variable elasticities of substitution, nonhomothetic output expansion effects, and nonneutral technical change. The model is applied to a large Canadian telecommunications firm, Bell Canada, for the period 1952-1972 when detailed data on four occupational groups, capital, materials, output, and the extent of automation are available. Our empirical results demonstrate the strong effects of innovative activity in this industry. Technical change was capital-using and labor-saving, with the labor-saving impact being felt most severely by the least skilled occupations.