IDEAS home Printed from https://ideas.repec.org/p/crt/wpaper/0729.html
   My bibliography  Save this paper

Technology and Labor Regulations

Author

Listed:
  • 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.
(This abstract was borrowed from another version of this item.)

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
    as

    Download full text from publisher

    File URL: http://economics.soc.uoc.gr/wpa/docs/0729.pdf
    File Function: First version
    Download Restriction: No
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Diego Comin & Bart Hobijn, 2009. "Lobbies and Technology Diffusion," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 229-244, May.
    2. Ethan Lewis, 2005. "Immigration, Skill Mix, and the Choice of Technique," Working Papers 05-04, Center for Economic Studies, U.S. Census Bureau.
    3. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    4. Caballero, Ricardo J. & Hammour, Mohamad L., 1998. "Jobless growth: appropriability, factor substitution, and unemployment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 51-94, June.
    5. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2005. "Work and Leisure in the U. S. and Europe: Why so Different?," Harvard Institute of Economic Research Working Papers 2068, Harvard - Institute of Economic Research.
    6. Zeira, Joseph, 2005. "Machines as Engines of Growth," CEPR Discussion Papers 5429, C.E.P.R. Discussion Papers.
    7. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1055-1089.
    8. Susanto Basu & David N. Weil, 1998. "Appropriate Technology and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1025-1054.
    9. Alesina, Alberto & Baqir, Reza & Easterly, William, 2000. "Redistributive Public Employment," Journal of Urban Economics, Elsevier, vol. 48(2), pages 219-241, September.
    10. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    11. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 28(Jul), pages 2-13.
    12. Richard Rogerson, 2008. "Structural Transformation and the Deterioration of European Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 235-259, April.
    13. Rogerson, Richard & Wallenius, Johanna, 2009. "Micro and macro elasticities in a life cycle model with taxes," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2277-2292, November.
    14. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    15. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 563-606.
    16. Blau, Francine D & Kahn, Lawrence M, 1996. "Wage Structure and Gender Earnings Differentials: An International Comparison," Economica, London School of Economics and Political Science, vol. 63(250), pages 29-62, Suppl..
    17. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
    18. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, January-J.
    19. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
    20. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
    21. Albert Alesina & Stephan Danninger & Massimo Rostagno, 2001. "Redistribution Through Public Employment: The Case of Italy," IMF Staff Papers, Palgrave Macmillan, vol. 48(3), pages 1-2.
    22. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
    23. Blau, Francine D. & Kahn, Lawrence M., 1999. "Institutions and laws in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 25, pages 1399-1461, Elsevier.
    24. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
    25. Kahn, Lawrence M, 1998. "Collective Bargaining and the Interindustry Wage Structure: International Evidence," Economica, London School of Economics and Political Science, vol. 65(260), pages 507-534, November.
    26. Hernando Zuleta, 2007. "Why labor income shares seem to be constant?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 16(4), pages 551-557.
    27. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
    28. Comin, D. & Hobijn, B., 2004. "Cross-country technology adoption: making the theories face the facts," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 39-83, January.
    29. Freeman, Richard B. & Katz, Lawrence F. (ed.), 1995. "Differences and Changes in Wage Structures," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226261607, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09i8hjg0kpi is not listed on IDEAS
    2. 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 Businesss School.
    3. 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.
    4. Daron Acemoglu, 2010. "When Does Labor Scarcity Encourage Innovation?," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1037-1078.
    5. 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 Businesss School.
    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    12. 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.
    13. Zsofia Barany, 2016. "The Minimum Wage and Inequality: The Effects of Education and Technology," SciencePo Working papers hal-03594158, HAL.
    14. Zsofia Barany, 2016. "The Minimum Wage and Inequality: The Effects of Education and Technology," Post-Print hal-03594158, HAL.
    15. 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.
    16. Barbosa, Natália & Faria, Ana Paula, 2011. "Innovation across Europe: How important are institutional differences?," Research Policy, Elsevier, vol. 40(9), pages 1157-1169.
    17. Amin, Mohammad, 2009. "Are labor regulations driving computer usage in India's retail stores?," Economics Letters, Elsevier, vol. 102(1), pages 45-48, January.
    18. 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;CES;MSH, vol. 25(61), pages 117-163.
    19. Hery Ferdinan, 2013. "The impact of technological growth on economic performance in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, Department of Economics, vol. 5(1), pages 15-24, April.
    20. Zsofia Barany, 2011. "The minimum wage and inequality - the effects of education and technology," SciencePo Working papers hal-01069474, HAL.
    21. 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.
    22. 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 Group, vol. 24(1), pages 121-147, January.
    23. 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.

    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. Alberto Alesina & Michele Battisti & Joseph Zeira, 2018. "Technology and labor regulations: theory and evidence," Journal of Economic Growth, Springer, vol. 23(1), pages 41-78, March.
    2. Francine D. Blau & Lawrence M. Kahn, 2003. "Understanding International Differences in the Gender Pay Gap," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 106-144, January.
    3. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute of Labor Economics (IZA).
    4. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    5. Francine D. Blau & Lawrence M. Kahn, 2005. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 184-193, February.
    6. Paul Beaudry & David Green, 2001. "Population Growth, Technological Adoption and Economic Outcomes: A Theory of Cross-Country Differences for the Information Era," NBER Working Papers 8149, National Bureau of Economic Research, Inc.
    7. Giuseppe Bertola & Francine Blau & Lawrence Kahn, 2007. "Labor market institutions and demographic employment patterns," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(4), pages 833-867, October.
    8. Florian Brugger & Christian Gehrke, 2017. "The Neoclassical Approach to Induced Technical Change: From Hicks to Acemoglu," Metroeconomica, Wiley Blackwell, vol. 68(4), pages 730-776, November.
    9. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    10. Winfried Koeniger & Marco Leonardi & Luca Nunziata, 2007. "Labor Market Institutions and Wage Inequality," ILR Review, Cornell University, ILR School, vol. 60(3), pages 340-356, April.
    11. Jerzmanowski, Michal & Tamura, Robert, 2019. "Directed technological change & cross-country income differences: A quantitative analysis," Journal of Development Economics, Elsevier, vol. 141(C).
    12. Puhani, Patrick A., 2001. "Wage rigidities in Western Germany? Microeconometric evidence from the 1990s," ZEW Discussion Papers 01-36, ZEW - Leibniz Centre for European Economic Research.
    13. Jeff Borland, 2000. "Economic Explanations of Earnings Distribution Trends in the International Literature and Application to New Zealand," Treasury Working Paper Series 00/16, New Zealand Treasury.
    14. Gino Gancia & Andreas Müller & Fabrizio Zilibotti, 2010. "Structural development accounting," Economics Working Papers 1249, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2011.
    15. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2001. "Comparative Analysis of Labor Market Outcomes: Lessons for the US from International Long-Run Evidence," NBER Working Papers 8526, National Bureau of Economic Research, Inc.
    16. Acemoglu, Daron & Gancia, Gino & Zilibotti, Fabrizio, 2012. "Competing engines of growth: Innovation and standardization," Journal of Economic Theory, Elsevier, vol. 147(2), pages 570-601.3.
    17. Goni, Edwin & Maloney, William F., 2014. "Why don't poor countries do R&D ?," Policy Research Working Paper Series 6811, The World Bank.
    18. Sener, Fuat, 2006. "Labor market rigidities and R&D-based growth in the global economy," Journal of Economic Dynamics and Control, Elsevier, vol. 30(5), pages 769-805, May.
    19. Enrico Saltari & Clifford Wymer & Daniela Federici & Marilena Giannetti, 2011. "The impact of ICT on the Italian productivity dynamics," Working Papers in Public Economics 149, University of Rome La Sapienza, Department of Economics and Law.
    20. Paul Beaudry & Mark Doms & Ethan Lewis, 2006. "Endogenous skill bias in technology adoption: city-level evidence from the IT revolution," Working Paper Series 2006-24, Federal Reserve Bank of San Francisco.

    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

    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:crt:wpaper:0729. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/deuchgr.html .

    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: Kostis Pigounakis (email available below). General contact details of provider: https://edirc.repec.org/data/deuchgr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.