Abstract
Extant empirical studies document that productivity gains due to technological progress often lead to reductions in employment. This paper rationalizes the stated empirical finding within the context of the theory of the competitive firm under price uncertainty. We show that technological progress affects employment adversely if the firm's coefficient of relative risk aversion is no less than unity and its production technology exhibits non-decreasing returns to scale. On the other hand, technological progress unambiguously increases output if the firm's preference has non-increasing absolute risk aversion.
| Original language | English |
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| Pages (from-to) | 565-571 |
| Number of pages | 7 |
| Journal | Quarterly Review of Economics and Finance |
| Volume | 39 |
| Issue number | 4 |
| DOIs |
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| Publication status | Published - 1 Jan 1999 |
Funding
sWe would like to thank an anonymous referee for helpful suggestions. The usual disclaimer applies.