Boucekkine, R

Crifo, P

Mattalia, Claudio

English

Institutional Research Information System University of Turin

    This is an author version of the contribution published on: Questa è la versione dell’autore dell’opera: Mattalia Claudio, “Technological Progress, Organizational Change and the ICT Revolution”, in “Atti del XXXIII Convegno AMASES”, Università degli Studi di Parma, 2009 Technological Progress, Organizational Changeand the ICT RevolutionRaouf Boucekkine (Université catholique de Louvain and University of Glasgow)Patricia Crifo (Ecole Polytechnique, UHA and Université catholique de Louvain)Claudio Mattalia (University of Torino and Université catholique de Louvain)1 IntroductionThe recent Information and Communication Technologies (ICT) revolution has favouredthe development of numerous innovative workplace practices in most OECD countries.Work organization inside firms evolved from specialization to multi-tasking, and flexibleforms of workplace organization have largely diffused in most OECD economies.Parallel to this trend, we can also observe an increasing employment share of skilledworkers in major OECD countries during the 1990s along with the dissemination of ICT.A definitely much less stressed aspect of organizational change, which is central inthis paper, is the impact on human resources departments. In general, one would expectthat the role of such department will be significantly altered in a situation where flexibleforms of work organization are so massively adopted. Indeed, a quick look at the dataconfirms this intuition. In particular, the management ratio (managers as percentageof the workforce) increased in many OECD countries during the twentieth century, butstarted decreasing in the early 2000s. In France for instance, the percentage of workersemployed in managerial and professional specialty occupations rose from 7.1% in 1982 to11.1% in 2000 and decreased to 4.8% in 2004. Similarly, this ratio ranges from 10.5% in1970 to 14.6% in 2000 and 13.9% in 2004 in the United States.In the light of all these data, the evolution of skills, job content and work organizationobserved in many OECD countries over the past decades can be summarized in the fol-lowing three main characteristics: 1) an increase in the proportion of workers employed inmanagerial occupations, together with a recent decrease since the ICT revolution; 2) thediffusion of innovative workplace practices based on multi-tasking and computer use; 3)an increase in skills requirements.This paper studies the determination of the optimal number of tasks performed perworker in an economy where individuals devote time to production and human capitalaccumulation, and where multi-tasking both increases production and gives rise to coor-dination costs. In particular, we shall distinguish between horizontal coordination costs,which involve the costs of coordinating the tasks accomplished by each production worker,and vertical coordination costs, which reflect coordinating different workers and mainlyconcern workers employed in human resources services. We then examine how the economyreacts to permanent exogenous technological accelerations, and we find that the model isable to reproduce the three stylized facts outlined above.12 The modelThe model proposed in this paper considers an economy in discrete time (from 0 to∞) withan active population of size L. The firm occupational structure is composed of two typesof jobs: human resources jobs (in fraction ρ of the workforce employed) and productionjobs (in fraction 1 − ρ of the workforce employed). Workers devote time to production(either in the human resources service or in the production service) and to human capitalaccumulation.2.1 Technology and coordination costsThe economy is characterized by a representative firm that produces a homogeneous (nu-meraire) good according to the following technology:yt = At · [(1− ρt) · ht · Tt · Lt]1−α nαt 0 < α < 1where At is a productivity parameter, Lt is the volume of hours worked with human capitalht, Tt is worker’s productive time, nt is the number of tasks performed per worker and ρtis the fraction of the workforce in the personnel (human resources) service.Producing the good implies two types of costs: production costs and coordinationcosts. Since production requires physical resources and knowledge about how to combinethem, production costs correspond to traditional costs of transforming inputs into output(physical - productive - resources expenses) whereas coordination costs correspond to thecosts of combining and managing interactions and dependencies between resources (tasksand/or workers). In our model, labour is the sole input, therefore production costs equalthe total wage bill and coordination costs depend on the number of tasks realized perworker (n) and on the fraction of workers in the human resources service (ρ).The firm’s profits (given that output is the numeraire) then write:πt = At · [(1− ρt) · ht · Tt · Lt]1−α nαt − C (n, ρ)− wt · ht · Tt · Ltwhere wt is the wage rate per efficiency unit of labour and C (n, ρ) represents coordinationcosts measured as pure output loss.The coordination costs function depends on horizontal and vertical coordination costsas follows:C(n, ρ) =h(n, ρ) · v(ρ)dwhere h(n, ρ) denotes horizontal coordination costs and v(ρ) denotes vertical coordinationcosts, while d reflects the extent of coordination costs (a higher d reduces the importanceor magnitude of coordination costs).We then assume:h (n, ρ) = nξ · (1− ρ)θwhere ξ, θ > 0, i.e. horizontal coordination costs increase with the number of tasks percapita n and with the size of the production service (1− ρ), given elasticities parametersξ and θ, and also:v (ρ) = ρη2where η can be positive or negative, i.e. vertical coordination costs depend on the share ofworkers in the human resources service (when η > 0 they are an increasing function of thisshare, and this corresponds to a more bureaucratic situation, while when η < 0 they area decreasing function of this share, and this corresponds to a less bureaucratic situation).At this point in the decentralized economy the firm’s optimization program is givenby:maxnt,Tdt ,ρtπt = Ath(1− ρt)htT dt Lti1−αnαt −nξt (1− ρt)θ ρηtdt− wthtT dt Ltwhere dt > 0 and where T dt denotes now the working time demanded by the firm.2.2 Household and human capital accumulationThe household in the economy has a utility function given by:u (ct) = ln ctand it is endowed with one unit of time supplied each period, that is spent on working (thefraction T st ) or on human capital accumulation (the fraction 1−T st ), and the accumulationof human capital is described by the following equation:ht+1 = Et · hδt · (1− T st )1−δ 0 < δ < 1where Et is an efficiency parameter.The household’s intertemporal optimization program in the decentralized economy isthen given by:max{ct,T st ,at+1,ht+1}∞t=0∞Xt=0βt ln cts.t.at+1 = (1 + rt) at + wthtT st − ctht+1 = Ethδt (1− T st )1−δwhere β is the discount factor (with 0 < β < 1) and at represents the assets held in t.2.3 Market equilibrium conditionsTogether with the solution of the problem of the firm and of the household, the stationaryequilibrium of the decentralized economy is characterized also by the market equilibriumcondition:yt = ct +nξt (1− ρt)θ ρηtdtand by the labour market equilibrium condition:T dt = T st = TtIt is now possible to derive the optimality and equilibrium conditions of the model, thesteady-state values of the different variables and the associated comparative statics for the3decentralized economy. Finally, it is possible to consider some simulation exercises in orderto examine how the economy reacts to permanent exogenous technological accelerations.The important aspect is that the model is able to reproduce the three stylized facts thatemerge from the data. Indeed, it delivers a permanent trend towards multi-tasking andhuman capital accumulation following permanent technological accelerations, while thesize of the human resources department (that is the fraction of workers devoted to reducecoordination costs) is also significantly raised and then reduced. In conclusion, the modelbehaves extremely well in replicating the organizational features of the ICT revolution.3 ConclusionThis paper develops a model to analyze the intensity of multi-tasking under various exoge-nous technological accelerations. The model has two original characteristics: it includesendogenous coordination costs, and it introduces the size of the human resources depart-ment as a key variable for the firms to control their coordination costs. In our modelling,and building on recent economic and management literature, we distinguish between ver-tical and horizontal coordination costs, which proves crucial in the equilibrium propertiesof the model. The model also includes endogenous human capital accumulation, andtherefore brings together enough ingredients to study some highly relevant stylized factsidentified in OECD data. Although technological progress is exogenous in our set-up, andno technology adoption decision is to be taken, we believe that the model offers a usefulshortcut to analyze the consequences of technological accelerations on workplace organi-zation. The fact that all performed numerical simulations corroborate the ability of themodel to replicate the observed stylized facts is a good indication of that.References[1] Askenazy, P. (2001), “Innovative Workplace Practices and Occupational Injuries andIllnesses in the United States”, Economic and Industrial Democracy 22 (4), 485-516.[2] Askenazy, P., E. Caroli and V. Marcus (2002), “New Organizational Practices andWorking Conditions: Evidence from France in the 1990’s”, Recherches Economiquesde Louvain 68 (1-2), 91-110.[3] Boucekkine, R. and P. Crifo (2008), “Human Capital Accumulation and the Transitionfrom Specialization to Multi-Tasking”, Macroeconomic Dynamics 12 (3), 320-344.[4] Boucekkine, R., P. Crifo and C. Mattalia (2009), “Is There Too Much Multi-TaskingFollowing the ICT Revolution?”, Working Paper in progress.[5] Bresnahan, T., E. Brynjolfsson and L. Hitt (2002), “Information Technology, Work-place Organization and the Demand for Skilled Labor: Firm-Level Evidence”, Quar-terly Journal of Economics 117 (1), 339-376.[6] Osterman, P. (1994), “How Common is Workplace Transformation and Who Adoptsit?”, Industrial and Labor Relations Review 47 (2), 173-188.4

Technological Progress, Organizational Change and the ICT Revolution

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Technological Progress, Organizational Change and the ICT Revolution

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