Labor Substitution Research Articles

Information and Communication Technologies and Employment: Complements or Substitutes?

Information and communication technologies have changed the way in which a very large number of professions are exercised. As a result, digital technology can therefore contribute to the reduction or destruction of jobs and consequently to the rise in unemployment. Hence the fear of workers regarding the substitution of labor by machinery. Nevertheless, Schumpeterian theory maintains that technical progress generates opportunities for profit, and therefore investment opportunities, which when seized by companies are transformed into jobs. It is in the light of this controversy that the purpose of this paper is to analyze the effect of information and communication technologies on employment in Cameroon. By applying the OLS method to data covering the period 1980-2016, the results reveal that ICT promotes job creation in Cameroon. Thus, we suggest to the Cameroonian government to create more favorable conditions for the development of ICTs which will have the positive externality of job creation.

Are Indian Subcontinent remittance markets connected to each other?

Indian subcontinent countries are some of the largest exporters of labor, and thus, largest receivers of remittances. Having many characteristics in common, their labor markets may be connected due to labor substitution and complementarity. We study the interactions of remittance inflows into India, Pakistan, Bangladesh and Sri Lanka via the Diebold-Yilmaz method. We find a low degree of spillovers across countries. In other words, the dynamics of remittance inflows in each country are largely explained by internal factors, not due to spillovers from other countries. That indicates that international remittance inflows in countries in the Indian Subcontinent that we consider in this study are essentially independent. We also find that the dynamic connectedness tends to fall over time in the aftermath of the 2008–2010 financial crisis, which is reversed after 2014. The initial decline probably happened due to the recovery in the labor receiving economies whereas the increase after 2014 probably reflects the jitters felt in all economies. We conclude that spillover of four countries’ remittance inflows is time-varying.

Exploring the relationship between plot size and fertilizer use efficiency: evidence from large-scale farming in China

PurposeThis paper investigates the relationship between plot size and fertilizer use efficiency (FE) in Chinese large-scale farming and searches for the underlying mechanisms that explain this relationship.Design/methodology/approachBased on a household- and plot-level data set of large-scale production units (LSPUs) from Jiangsu and Jiangxi Provinces, the technical and fertilizer use efficiency of large-scale rice production is estimated by applying a translog stochastic frontier production function. The authors impose a monotonicity condition on the translog frontier using a three-step procedure to get theoretically consistent efficiency estimates. A beta regression model is then used to explore the association between plot size and LSPUs' efficiency in fertilizer application.FindingsThe average FE for the sampled plots is around 30%, which shows a large potential for LSPUs to reduce fertilizer use. A U-shaped relationship is observed between plot size and FE. The authors relate this non-linear pattern to the substitution of labour with capital-intensive technology and the efficiency differences in terms of farming performance between family and hired workers.Originality/valueFirst, according to the authors’ knowledge, this paper is a first attempt to study the size–efficiency relationship focussing on fertilization practices of large-scale farming. The second contribution lies in the large-scale ranges of the plot-level data set. Third, efforts are made to reveal the mechanisms determining the plot size–FE relationship. Fourth, the authors provide guiding evidence for policymaking, as they show that the size of individual plots deserves equal attention in land consolidation decisions. Methodologically, this paper improves existing estimates of single-factor technical efficiency issued from a restricted production frontier model.

Household-owned farm machinery vs. outsourced machinery services: The impact of agricultural mechanization on the land leasing behavior of relatively large-scale farmers in China

In the context of the rapid rise of agricultural mechanization in China, this paper examines the impact of household-owned farm machinery and outsourced agricultural machinery services on the land leasing behavior of Chinese relatively large-scale farmers. Based on the CFPS2018 survey data, this study suggests that farm machinery is beneficial for expanding the scale of farms. With increases in household-owned machinery, farmers are more inclined to lease-in land, and they are less inclined to rent-out land. The more agricultural machinery services farmers purchase, the more they tend to transfer-in land and the probability of transfer-out land is lower. However, uneven village terrain can weaken the effects of the two kinds of agricultural mechanization on land leasing. Moreover, this study confirms that household-owned farm machinery and outsourced agricultural machinery services could positively regulate each other's influence on land leasing, indicating that there is a complementary relationship between the two types of agricultural machinery. Further mechanism analyses show that the channels by which household-owned farm machinery and outsourced agricultural machinery services affect land leasing are quite different. The self-purchased machinery of farmers mainly plays a role through labor complementarity effects, while outsourced agricultural machinery services mainly affect land leasing through labor substitution effects.

Decomposition Factors Household Energy Subsidy Consumption in Indonesia: Kaya Identity and Logarithmic Mean Divisia Index Approach

For decades, the subsidy had prompted excessive and wasteful while offering little motivation to boost energy efficiency or reduce domestic greenhouse gas emissions. This paper aimed to measure household subsidy energy by examining the relationship between the other ten variables. The Logarithmic Mean Divisia Index (LMDI) and decomposition index were deployed to recognize the determinant effects that drive household's subsidy energy consumption. This study also presented an ARDL model applied. The robustness of the Granger Causality, Long-run, and Short-run causality during 1990-2017 was assessed. Based on LMDI, we found out that Population, Income Per Capita, Ratio National Renewal Energy over Fuel Fossil, Gross Capital Stock, Urban Household Consumption, and Ratio Household Subsidy were the positive factors that aggravate the change in household energy subsidy. The negative sign of Ratio National Energy Intensity effect, Ratio Fossil Renewal Energy effect, Ratio Capital Labour substitution, and Ratio Household over Labour Force signified the decreasing significance of less household energy subsidy. On the ECM, we identified a negative sign speed-of-adjustment and significant at 1%. It implied that all the ten variable effects were converging in the long run after an experience shocks. The equation parameters were considered stable since the CUSUM gets inside the two critical lines. Additional RESET test of the stability to ascertain whether the estimated model was linear or correctly specified has been performed.

Labor Substitutability among Schooling Groups

Labor Substitutability among Schooling Groups

Labor Substitutability Among Schooling Groups

Labor Substitutability Among Schooling Groups

ОСОБЕННОСТИ ФОРМИРОВАНИЯ И ОЦЕНКА ЦИКЛА ВОСПРОИЗВОДСТВА ТРУДОВОГО КАПИТАЛА

The substitution of live labor by machines and the need to perform more complex technical and technological operations creates qualitatively different requirements for labor resources. The emphasis is shifting towards the growth of qualifications and professional skills of the workforce, which necessitates the assessment and provision of conditions for the full formation and reproduction of their labor capital. The reproduction of labor capital occurs at the expense of targeted investments, which have a cyclical-wave character, starting from the initiation stage and ending with the process of evaluating the result obtained. Such an approach to assessing the cycle of reproduction of labor capital requires the development of a system of indicators for its evaluation at each stage of its formation. The article substantiates the application of the concept of a cyclic-wave approach to the study and analysis of labor capital and offers a methodological approach that allows you to cover each stage of the life cycle of labor capital reproduction, to evaluate it, both at the stage of investment and at the stage of their payback. The novelty of the presented article consists in the systematization of groups of indicators of labor capital, which allow to identify and evaluate the stages of its reproductive life cycle Practical approbation of the author's approach to assessing and identifying the life cycle of labor capital is based on the example of evaluating the effectiveness of the use of labor resources in Russia. As a general result of the study, the advantages of the proposed methodological approach are identified, priority directions of socio-economic policy in the field of labor capital are identified.

Revisiting the relationship between farm mechanization and labour requirement in India

In many developing and emerging economies, better employment opportunities in the non-farm sector have increased rural wages due to labour shortages during the peak agricultural season. Increasing wages often cause a substitution of labour for mechanical power, but extensive use of labour-saving technologies may cause labour displacement and have serious equity concerns. Using the household and individual fixed effect estimation approach, this paper analyses the relationship between different types of farm machines and labour requirements in India. The results suggest that a unit increase in the level of farm mechanization increases the demand for hired labour by 12%. Moreover, we find that the level of farm mechanization has a positive effect on women’s participation in farm work, while it decreases the probability of children participating in agriculture-related work. Disaggregated analysis based on types of farm machinery suggests that water-lifting equipment, draft power and tractors increase the probability of male household members working on their farms, while all types of farm machines, except tractors, have a positive effect on female farm labour participation. We also find that the effect of farm mechanization on the demand for hired labour decreases as the size of the farm increases.

Wage increase and innovation in manufacturing industries: Evidence from China

This paper explores the relationship between wage increase and innovation and investigates the underlying mechanisms through which wage increase affects innovation. Empirical results, based on the data from 37 two-digit manufacturing industries in China from 2002 to 2019, show that the increases in wages do contribute to innovation in general but their contributions vary across industries and over time. Specifically, the effects of the increasing wages on innovation were insignificant before 2008 but became positively significant after 2008. Moreover, labor productivity acts as a mediating channel between wage increase and innovation while the labor substitution mechanism does not work. The findings in this study offer a new understanding of the effects of the increasing wages on innovation in developing countries.

Technology, capital substitution and labor dynamics: global workforce disruption in the 21st century?

Advanced agriculture, mining and construction are trimming their workforces, manufacturing has been ‘hollowed out’, and the service sector is increasingly capital-intensive. Rapid economic and technological transformation influences company investment and can affect labor demand and wage relativities. From a deductive introduction oriented to the societal scope of innovations, this inquiry proceeds empirically, for the first time analyzing seven interacting drivers of capital / labor substitution or labor displacement. Three time-phased response scenarios are related to levels of technological impact. Thereafter, inductive theorising probes workforce futures for both developed and developing countries, arguing that not only are immediate relations of capital and labor in flux but, more widely, so are industrial and market organisation, the global geo-economic order, and the human trajectory itself.

Economic Consequences of Ill-Health in Rural Ethiopia

ABSTRACT We use three years of household panel data to analyze the effects of ill-health on household economic outcomes in rural Ethiopia. We examine the immediate effects of various ill-health measures on health expenditure and labor supply, the subsequent coping responses, and finally the effect on income and consumption. We find evidence of substantial economic risk in terms of increased health expenditure and reduced agricultural productivity. Households are able to smooth consumption by resorting to intra-household labor substitution, borrowing and depleting assets. However, maintaining current consumption through borrowing and depletion of assets is unlikely to be sustainable and displays the need for health financing reforms and safety nets that reduce the financial consequences of ill-health.

Cost Efficiency Status of Rice Farmers Participating in IFAD/VCD Programme in Niger State of Nigeria

This research empirically determined the cost efficiency of the farmers that participated in the IFAD/VCD programme in Niger State of Nigeria. The study elicited cross-sectional data of the 2018 cropping season viz. well-structured questionnaire complemented with interview schedule from a sample size of 110 respondents selected through a multi-stage sampling technique. The sampled data were analysed using the stochastic cost frontier model. The empirical evidence showed that none of the farmers was on the cost frontier surface i.e. inability to attain optimal minimum cost in the cultivation of rice in the studied area. The identified significant idiosyncratic variables militating against cost efficiency were the poor health status of the farm family which led to the extra cost incurred in labour substitution and diseconomies of scale due to their small-scale mode of operation. Therefore, the study recommends that the policymakers should sensitize the farmers on the importance of health preventive measures and should endeavour to improve on the existing basic health centres both in human capital and logistics. In addition, the farmers should be encouraged to explore cooperative marketing so as to take advantage of the bulk discount in input purchase and have bargaining power in the marketing of their output, thus tackling the problem of diseconomies of scale in their farm operations.

Decomposition Factors Household Energy Subsidy Consumption in Indonesia: Kaya Identity and LMDI Approach

For decades, the subsidy had prompted excessive and wasteful while offering little motivation to boost energy efficiency or reduce domestic greenhouse gas emissions. This paper aimed to measure household subsidy energy by examining the relationship between the other ten variables. The Logarithmic Mean Divisia Index (LMDI) and decomposition index were deployed to recognize the determinant effects that drive household's subsidy energy consumption. This study also presented an ARDL model applied. The robustness of the Granger Causality, Long-run, and Short-run causality during 1990-2017 was assessed. Based on LMDI, we found out that Population, Income Per Capita, Ratio National Renewal Energy over Fuel Fossil, Gross Capital Stock, Urban Household Consumption, and Ratio Household Subsidy were the positive factors that aggravate the change in household energy subsidy. The negative sign of Ratio National Energy Intensity effect, Ratio Fossil Renewal Energy effect, Ratio Capital Labour substitution, and Ratio Household over Labour Force signified the decreasing significance of less household energy subsidy. On the panel ARD-ECM, we identified a negative sign speed-of-adjustment and significant at 1%. It implied that all the ten variable effects were converging in the long run after an experience shocks. The equation parameters were considered stable since the CUSUM gets inside the two critical lines. Additional RESET test of the stability to ascertain whether the estimated model was linear or correctly specified has been performed.

Distracting activities in times of COVID‐19 pandemic and their relation to labor supply

Under the hypothesis that workers become distracted and spend less time working during the COVID-19 pandemic, we analyze, via a model of endogenous growth, the relationship between distracting activities and home office supply. We find a strong theoretical relation between the intertemporal elasticity of substitution of the time spent on distracting activities and the intertemporal elasticity of substitution of home office labor. We also analyze the effect that the intertemporal elasticity of substitution of home office labor has on the marginal productivity of effective labor and the growth rate of production.

FINTECH revolution: are we prepared?

"Financial Technology (FinTech) has brought a revolution in the financial sector including incremental technological innovations in financial services. FinTech has triggered significant changes in the way financial sector is designed and it operates in the digital era. By increasing speed and reducing costs, FinTech has strongly influenced consumers to move towards digitalization. This has had as result the development of more tailored financial services addressed to individuals. For this purpose, a minimum level of financial literacy is considered a key driver of consumer behaviour. The main objective of this study is to analyse the impact of FinTech revolution on the labour market. In this paper, we have performed the statistical analysis of secondary data for EU-28 Member States (including United Kingdom) within the interval comprised between 2017 and 2019 with the aim to identify which is the level of labour substitution triggered by FinTech and its short-and medium-term effects on the labour market in the financial sector. Conclusions of this study revealed that although a higher level of digitalization is associated with a lower number of individuals employed in the financial sector, especially in the countries with the highest degree of digitalisation in the EU-28 (Digital Frontrunners), there are still a number of IT professionals performing operational tasks."

The Impact of Fixed Asset Investments on the Productivity of Production Factors in Agriculture

Purpose: The study aimed to determine the impact of the fixed asset investment on farms' productivity. The study adopted a research hypothesis according to which the increase of investment in fixed assets contributes to improved productivity of production factors in agriculture. Design/methodology/approach: The research was based on the Central Statistical Office data storage statistics and the study of reference books. The main source of information was the data from 4,803 farms, which consistently kept accounts within the Farm Accountancy Data Network system. The analyses were based on the productivity indicators in the researched farms. The Cobb-Douglas production function was used in the research. In addition to evaluating the effectiveness of the investment, there were used elements of marginal accounting. Findings: The Polish agricultural sector's investments after 2004 led to changes in the value and structure of agricultural holdings and supported the substitution of human labor with objectified labor. The studies have shown that an increase in the level of investment in agricultural holdings contributes to labor and land productivity growth. Moreover, the examined farms in the years 2005-2013 increased the productivity of capital equity, which indicates the development of farms. The increase in the investment outlays per unit of production factor contributed to increased investment efficiency. Practical Implications: The research results may be useful in economic practice in shaping investments in fixed assets in farms. They can also help to create an agricultural policy to support investment in agriculture. Originality/Value: The originality of the research consists of determining the impact of investments in fixed assets on the productivity of production factors in farms based on the Cobb-Douglas production function.

Do farmers gain internet dividends from E-commerce adoption? Evidence from China

This study examines the effects of e-commerce adoption on household income, using survey data of 1,030 households in China. The combination of propensity score matching and difference-in-difference method is employed to address the sample selection bias associated with e-commerce adoption. The results show that e-commerce adopters obtain significantly higher income than non-adopters, and such a significant and large income gain is mainly contributed by the significant increase in sales income. E-commerce adoption has a significant and negative impact on wage income due to the labor substitution effect, while it affects transfer income insignificantly. Additional analysis reveals that the income effects of e-commerce adoption are heterogeneous across geographic locations and household-level characteristics.

Automation and robotics in mining: Jobs, income and inequality implications

Although mining is a capital-intensive industry, its contribution to employment creation is generally praised as a leading local benefit to justify new or expanding extraction projects. However, labour substitution from automation and robotics is increasing in a wide range of modern mining processes. Such labour replacement is likely to intensify in the coming years due to advances and cost reductions in technology. Additionally, the COVID-19 pandemic also adds to the impetus of relying less on human interaction for critical operational processes. In this paper, we provide some insights on the global trends of automation/robotics in mining and discuss the main economic impacts that increasing human labour substitution could bring to mining communities, regions, and nations. We focus on mining automation/robotics impacts on jobs, income (including taxes), and regional inequality. We conclude by discussing policy options that governments could consider for mitigating these impacts, including the reskilling of miners and tax transfers.

Not a Typical Firm: The Joint Dynamics of Firms, Labor Shares, and Capital–Labor Substitution

The decline in the U.S. labor share is far from uniform across firms. While the aggregate labor share has declined, especially in manufacturing, retail, and wholesale, the labor share of a typical firm in these industries has risen. This paper studies the dynamics of the substitution of capital for labor at the firm level and its implications for market structure and labor shares. We introduce a model of firm dynamics where firms make costly upfront investments to adopt the capital-intensive technologies required to automate additional tasks. Following a decline in the price of capital, large firms automate more of their tasks and become more capital intensive; while the median firm continues to operate a more labor-intensive technology. In line with firm-level data, our model generates transitions in which the labor share of the median firm increases at the same time as the aggregate labor share declines. We use an extension of our model that allows for endogenous markups to study the role of rising competition and reallocation towards more productive and higher-markup firms as another driver of the decline in the labor share during 1982–2012. We provide a quantitative decomposition showing that reallocation played a minor role in explaining the decline in the labor share in U.S. manufacturing but an important role in retail and other sectors. The substitution of labor with cheaper capital in a widening range of tasks played a more dominant role in explaining the decline of the manufacturing labor share.