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.