Information Technology and Firm Employment

50 Pages Posted: 13 Apr 2019 Last revised: 11 Jun 2020

See all articles by James E. Bessen

James E. Bessen

Technology & Policy Research Initiative, BU School of Law

Cesare Righi

Universitat Pompeu Fabra; Barcelona Graduate School of Economics

Date Written: May 1, 2020

Abstract

Do firms displace labor with new information technologies such as “artificial intelligence”? It is challenging to distinguish the effects of technology adoption from unobserved productivity and demand shocks. We take a first look at the economic impacts of large custom software investment —“IT spikes”—using a novel methodology to obtain consistent estimates. Following these events, firm employment increases by about 7% and revenues by about 11%. Rather than displace labor, IT spikes increase revenues and markups, implying decreased labor share of output. Moreover, growth is greater for firms that use AI, IT-producing firms, newer firms, and those in the trade, service, and financial sectors.

Keywords: Iinformation Technology, Artificial Intelligence, Firm Productivity, Employment Growth, Firm Growth, Labor Share, Markups

JEL Classification: D22, J21, O33

Suggested Citation

Bessen, James E. and Righi, Cesare, Information Technology and Firm Employment (May 1, 2020). Boston Univ. School of Law, Law and Economics Research Paper No. 19-6 (2019), Available at SSRN: https://ssrn.com/abstract=3371016 or http://dx.doi.org/10.2139/ssrn.3371016

James E. Bessen (Contact Author)

Technology & Policy Research Initiative, BU School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Cesare Righi

Universitat Pompeu Fabra ( email )

Carrer de Ramon Trias Fargas 25-27
Jaume I building, room 20.1E34
Barcelona, 08005
Spain

HOME PAGE: http://www.crighi.com

Barcelona Graduate School of Economics ( email )

HOME PAGE: http://www.crighi.com

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