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

Yongsung Chang and Jay Hong

American Economic Review, 2006, vol. 96, issue 1, 352-368

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.

Date: 2006
Note: DOI: 10.1257/000282806776157687
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Working Paper: Do technological improvements in the manufacturing sector raise or lower employment? (2005)
Working Paper: Do technological improvements in the manufacturing sector raise or lower employment? (2005)
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