The Relationship between Technical Progress and Employment: A Comment on Autor and Salomons

Levy Economics Institute, Working Papers Series, 2020

28 Pages Posted: 18 Feb 2020 Last revised: 14 Apr 2020

See all articles by Jesus Felipe

Jesus Felipe

Asian Development Bank

Donna Faye Bajaro

affiliation not provided to SSRN

Gemma Bolotaulo Estrada

Asian Development Bank - Economic Research

John McCombie

University of Cambridge - Department of Land Economy

Date Written: February 3, 2020

Abstract

We show that Autor and Salomons’ (2017, 2018) analysis of the impact of technical progress on employment growth is problematic. When they use labor productivity growth as a proxy for technical progress, their regressions are quasi-accounting identities that omit one variable of the identity. Consequently, the coefficient of labor productivity growth suffers from omitted-variable bias, where the omitted variable is known. The use of total factor productivity (TFP) growth as a proxy for technical progress does not solve the problem. Contrary to what the profession has argued for decades, we show that this variable is not a measure of technical progress. This is because TFP growth derived residually from a production function, together with the conditions for producer equilibrium, can also be derived from an accounting identity without any assumption. We interpret TFP growth as a measure of distributional changes. This identity also indicates that Autor and Salomons’ estimates of TFP growth’s impact on employment growth are biased due to the omission of the other variables in the identity. Overall, we conclude that their work does not shed light on the question they address.

Keywords: Employment, Labor Productivity, Technical Progress, Total Factor Productivity

JEL Classification: E24, O30, O47

Suggested Citation

Felipe, Jesus and Bajaro, Donna Faye and Estrada, Gemma Bolotaulo and McCombie, John S. L., The Relationship between Technical Progress and Employment: A Comment on Autor and Salomons (February 3, 2020). Levy Economics Institute, Working Papers Series, 2020, Available at SSRN: https://ssrn.com/abstract=3531153 or http://dx.doi.org/10.2139/ssrn.3531153

Jesus Felipe (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Donna Faye Bajaro

affiliation not provided to SSRN

Gemma Bolotaulo Estrada

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

John S. L. McCombie

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
11
Abstract Views
154
PlumX Metrics