Are labor-saving technologies lowering employment in the banking industry? |
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Institution: | 1. Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, China;2. Department of Economics, School of Economics, Xiamen University, China;3. Department of Economics, Colgate University, Hamilton, NY, United States;1. University of Texas, Austin, TX, United States;2. University of Melbourne, Melbourne, Australia;3. University of North Carolina, Kenan-Flagler Business School, CB 3490, McColl Building, Chapel Hill, NC 27599-3490, United States |
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Abstract: | Labor statistics show that the average labor hours per dollar of banking output fell by more than 30% between 1992 and 2002. The proliferation of labor-saving technologies was widely believed to be the major reason. While the first-round effect of a labor-saving technology with a given level of output is a reduction in required labor per unit of output, the second-round effect is a reduction in wage costs that will increase output. Analytically, a given type of labor-saving technology is more likely to have a positive effect on employment if the elasticity of substitution between capital and labor, the price elasticity of demand, and the cost-reducing impact of the new technology are sufficiently large. The main empirical findings of this study are that labor-saving technologies, and the spillovers of these technologies, are associated with higher firm-level employment. These results seem robust to a wide range of specifications and controls. |
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