The Effect of Technological Change on the Task Structure of Jobs and the Capital-Labor Trade-Off in US Production

Abstract

This paper calibrates the Cobb-Douglas (CD) model of US aggregate production with empirically derived values of the relative shares of capital and labor. A conceptual framework is developed to show how technological progress can affect the relative importance of these shares in US production. To identify and track the transmission of technical change to the macro-economy, the CD model is transformed into the Solow growth model. Specific examples of different types of technical change are developed to illustrate their effect on the task structure of jobs, the capital/labor ratio, total factor productivity (TFP), and US aggregate output. These examples are supported with graphical and flowchart analyses providing intuition concerning the implications of technical change on the production process and the relative importance of the input shares of capital and labor. Some broader aspects of technical change are discussed including the task structure of future jobs and the importance of aligning the skills workers acquire with task requirements of US industry.