Who Will Write This Paper?
By Arnold Kling
Perhaps Cowen and Lemke. Here is my sketch:
Title: Technology Shifts and Unemployment
We present a model in which shifts in technology cause unemployment. There are two types of workers, which we call Type C and Type S. A technology is introduced that is a complement to Type C workers and a substitute for Type S workers. The result is to shift the terms of trade in favor of Type C workers and against Type S workers. For Type S workers, the equilibrium wage falls, and their response is dominated by the substitution effect. It no longer pays for them to work. For type C workers, the equilibrium wage rises, and their response is dominated by the income effect. Rather than increase spending on market goods and services, they increase leisure. Thus, both types of workers are less fully employed than was the case before the technology shift. This episode of high unemployment will end only as the composition of the labor force adapts, with the share of Type S workers declining and the share of Type C workers rising. We apply this model to the Great Depression, when agricultural laborers were the Type S workers and the technology shift was the use of tractors and trucking. We also apply the model to explain the decline in the employment/population ratio since 2000, where workers with skills that can be replicated overseas are the Type S workers and the technology shift is the penetration of the Internet.