The Effect Of Technology Progress On Employment And Its Influencing Factors

As the primary driving forces of the economy, technological progress hasbrought about tremendous economic growth. Yet, its impact on employment isdebatable, and empirical analyses on this topic have produced quite contradictoryresults: while some suggested a positive effect, some indicated a negative one, and forthe others, the overall effect was insignificant. These different outcomes may resultfrom the fact that the relative magnitude of the positive compensating effect andnegative impact effect of technological progress on employment differs in differentsamples (periods). Then, it come the questions like which factors and how theydetermine the overall effect, and which kind of policies and production environmenttend to increase the positive effect. In this paper, we seek to address these questions,which were overlooked by current literature.First, technology progresses are classified into product innovation and processinnovation according to their differences in technological content and form. Then wedemonstrate through formal model factors and mechanisms that determine the impactof these innovations on employment, and the results indicate that these twoinnovations each have both negative impact effect and positive compensate effect onemployment.Factors determining the employment effect of process innovation include thedegree of process innovation, returns to scale, the degress administrative monopoly,labor force cost share, skewness of the technology progress, and demand elasticity.The higher the degree of process innovation and the administrative monopoly, thelager the demand elasticity, labor force cost share and return to scale, the lower thedegree of skewness of the technology progress, the higher influence technologicalprogress has on employment promotion. Otherwise, the opposite holds.On the other hand, factors determining the employment effect of productinnovation mainly include increment of new product and product substitutability. Themore the increment of new product and the lager the product substitutability, the higher influence technological progress has on employment promotion. Otherwise,the opposite holds.Further more, this paper designs a new algorithm based on stochastic frontieranalysis, serving to estimate and decompose the total employment effect oftechnological progress in China’s large and medium size industrial enterprises,thereby helping judge which effect is dominant, impact effect or compensate effectand determine repressors in subsequent empirical analysis. Applying this techniqueto the national statistics from1999to2009, the results indicate that the compensateimpact is dominant.At last, a panel data model is designed to study the contributing factors andoverall effect of technology progress on employment，whose results confirm theprevious theoretical analysis. Moreover, some policy suggestions are made based onthese analyses.In sum, this paper identifies factors and associated mechanisms that determinethe effects of technology progress on employment, and make some policy suggestionsaccordingly. It is expected that the policy suggestion will be helpful in the design andconduct of employment related policy.