Technical change, even if it is limited in scope, can have employment, output, price and wage effects that ripple through the whole economy. This paper uses a flexible and tractable framework, with heterogeneous workers and technologies, and many tasks/goods, to analyze the general equilibrium effects of technical change for a limited set of tasks. Output increases and price falls for tasks that are directly affected. The effects on employment depend on the elasticity of substitution across tasks/goods. For high elasticities, employment expands to a group of more skilled workers. Hence for tasks farther up the technology ladder, employment falls, output declines, and prices and wages rise. For low elasticities, employment at affected tasks contracts among less skilled workers, as they shift to complementary tasks with unchanged technologies. In all cases, the output, price and wage changes are damped for more distant tasks, both above and below the affected group.  JEL codes: D50, E24, O33, O40

More on this topic

BFI Working Paper·Jun 10, 2025

Global Price Shocks and International Monetary Coordination

Veronica Guerrieri, Guido Lorenzoni, and Iván Werning
Topics: Monetary Policy
BFI Working Paper·Jun 5, 2025

Stablecoin Runs and the Centralization of Arbitrage

Yiming Ma, Yao Zeng, and Anthony Lee Zhang
Topics: Fiscal Studies, Technology & Innovation
BFI Working Paper·Apr 22, 2025

The Invention of Corporate Governance

Yueran Ma and Andrei Shleifer
Topics: Monetary Policy