Further sufficient conditions for an inverse relationship between productivity and employment

Authors

Kong Wing, Clement CHOWFollow
Kit Pong WONGFollow

Document Type

Paper Series

Publication Date

6-1999

No.

032-989

Abstract

Extant empirical studies document that productivity gaine 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 is non-increasing absolute risk aversion.

Comments

HKIBS Working Paper Series 032-989

Recommended Citation

Chow, K. W. C., & Wong, K. P. (1999). Further sufficient conditions for an inverse relationship between productivity and employment (HKIBS Working Paper Series 032-989). Retrieved from Lingnan University website: http://commons.ln.edu.hk/hkibswp/26