I'm not in economics, I'm actually studying sociology and I'm doing a subject about labor economics. I'm reading an article that talks about automation and says "The employment impact of technological progress in larger countries depends on the relative product elasticity-if the fall in price arising from the labor savings more than proportionately increases demand, we will see an expansion of employment. Since more open developing countries are often assumed to be price takers, we should therefore see any domestic innovations in productivity rewarded massively with a huge expansion in employment."

what does it mean by price from the labor savings? http://documents1.worldbank.org/curated/en/869281482170996446/pdf/WPS7922.pdf


1 Answer 1


fall in price arising from the labor savings

The price of a product is usually determined in part by its cost. (This holds in almost all theoretical models without strict capacity constraints, even in the extreme case of monopoly.) If automation can replace some of the labor with cheaper machines, cost will decrease, hence the product will be sold at a lower price.


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