Are labor-saving technologies lowering employment in the banking industry?

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11 Citations (Scopus)

Abstract

Labor statistics show that the average labor hours per dollar of banking output fell by more than 30% between 1992 and 2002. The proliferation of labor-saving technologies was widely believed to be the major reason. While the first-round effect of a labor-saving technology with a given level of output is a reduction in required labor per unit of output, the second-round effect is a reduction in wage costs that will increase output. Analytically, a given type of labor-saving technology is more likely to have a positive effect on employment if the elasticity of substitution between capital and labor, the price elasticity of demand, and the cost-reducing impact of the new technology are sufficiently large. The main empirical findings of this study are that labor-saving technologies, and the spillovers of these technologies, are associated with higher firm-level employment. These results seem robust to a wide range of specifications and controls.
Original languageEnglish
Pages (from-to)179-198
Number of pages20
JournalJournal of Banking and Finance
Volume30
Issue number1
DOIs
Publication statusPublished - 1 Jan 2006

Keywords

  • Banking
  • Employment
  • Labor-saving technology

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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