Tasks, Technology, and Factor Prices in the Neoclassical Production Sector

This paper introduces tasks into the neoclassical production sector. Competitive firms choose the
profit-maximizing amounts of factor-specific tasks that determine their factor demands and output
supplies. We show that the effect of factor-augmenting technical change on relative and absolute
factor prices can be decomposed into a productivity effect and a task-demand effect of opposite
sign. These effects appear since the novel task-based approach distinguishes between the demands
for tasks and the demands for factors. This perspective provides a new intuition for the emergence
of relative and absolute factor biases and the role of the elasticity of substitution.