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    This blog highlights effective ideas in the fight against poverty and exclusion, and analyzes the impact of development projects in Latin America and the Caribbean.
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    Is innovation a threat to employment in Latin America?

    By and - 4 de March de 2014, 6:25 am

    Joint blog post with Gustavo Crespi

    The relationship between innovation and employment has never been an easy one. For a long time innovation was seen as a potential threat to employment and economists got to the point of defining technological unemployment as a disease.

    The argument was that technological change could create unemployment through the substitution of capital for labor. The discussion has then evolved over time to take into account how different types of innovation under different market conditions may imply different effects on employment and employment composition.

    innovation employement Latin America


    For instance, process innovation can induce a substitution of capital for labor, but can also result in higher productivity, lower prices, and higher demand, which will eventually create new jobs for displaced workers (the well-known compensation effects). So, the final effects of innovation on employment depend on the balance between substitution and compensation effects.

    Few weeks ago a couple of articles by The Economist (“Coming to an office near you” and “The onrushing wave”) revamped the debate on how much employees should be concerned about new technologies pushing them out of their jobs. Although acknowledging that in the long run innovation still seems beneficial both in terms of quantity and quality of jobs, the articles report the opinion of economists (including Larry Summers), who believe that nowadays technical change is increasingly taking the form of

    capital that effectively substitutes for labor

    and that we may be facing a temporary phase of maladjustment to the productivity gains induced by the recent high paced sequence of technological changes.

    Is innovation a threat to employment in Latin America? Read more…