Technology adoption and specialized labor

Elias Carroni, Marco Delogu and Giuseppe Pulina

No 165, BCL working papers from Central Bank of Luxembourg

Abstract: Empirical evidence identifies shortages of specialized labor as one of the main obstacles to technology adoption. In this paper, we explain this phenomenon by developing a model in which firms require specialized labor to produce with a new (more efficient) technology. We assume that the cost of specializing labor increases with the efficiency gains that can be attained through the new technology. This reveals two opposing effects on the endogenous share of specialized labor. On the one hand, there is a wage effect by which efficiency gains widen the wage gap between specialized and unspecialized workers, raising the share of specialized labor. On the other hand, there is a learning effect by which efficiency gains increase specialization costs, reducing the share of specialized labor. We show the learning effect will dominate when firms have sufficient market power.

Keywords: Technology adoption; education; product differentiation (search for similar items in EconPapers)
JEL-codes: I26 J24 O33 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2022-09
New Economics Papers: this item is included in nep-lma
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Journal Article: Technology adoption and specialized labor (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:bcl:bclwop:bclwp165

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