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A Short-Run View of What Computers Do: Evidence from a UK Tax Incentive

Paul Gaggl () and Greg Wright ()

Economics Discussion Papers from University of Essex, Department of Economics

Abstract: We study the short-run, causal effect of Information and Communication Technology (ICT) adoption on the employment and wage distribution, providing direct insight into how ICT alters the demand for work within the firm. We exploit a unique natural experiment generated by a generous tax allowance on ICT investments for small UK firms and find that the primary short-run effect of ICT is to complement non-routine congnitive-intensive work. At the same time, we find less extensive substitution for routine cognitive work, a result at odds with existing long-run extimates. We find no effect of ICT on manual work in the short run. Overall, ICT raises average labor productivity within the firm.

Date: 2014
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Journal Article: A Short-Run View of What Computers Do: Evidence from a UK Tax Incentive (2017) Downloads
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