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American Economic Review: Vol. 96 No. 1 (March 2006)

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Do Technological Improvements in the Manufacturing Sector Raise or Lower Employment?

Article Citation

Chang, Yongsung, and Jay H. Hong. 2006. "Do Technological Improvements in the Manufacturing Sector Raise or Lower Employment?" American Economic Review, 96(1): 352-368.

DOI: 10.1257/000282806776157687

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 many more industries exhibit an employment increase in response to a permanent TFP shock. This raises serious questions about existing work that finds 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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Authors

Chang, Yongsung
Hong, Jay H.


American Economic Review


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