Empirics of Technology and Unemployment in Advanced Countries

This study is the first attempt to investigate the empirical relation between progress in technology and unemployment of high and low skilled workers at macro level. Although there is substantial literature on the theory to associate unemployment with technology, empirical analysis of the relation is rare. The theoretical background is split between two opposing assertions: On one side, technology is claimed to increase unemployment since more advanced technology replaces labor, especially in advanced countries where the cost of labor as wages is too high. On the contrary, technology is supposed to cause the enlargement of the already existing sectors and the formation of new industries. We established a model to check for the existence of a cointegrating relation between technology and unemployment using additional control variables with Pedroni’s (1999, 2001) methodology. After securing our model's adequacy, we report that technology leads to more unemployment, even in developed countries. On the other hand, we detailed the analysis by searching for the nature of the same relation with high and low skilled workers. Our estimation results revealed that the relationship is somewhat different for these skill groups