Working Paper: CEPR ID: DP12524
Authors: Sang Yoon; Tim Lee; Yongseok Shin
Abstract: We analyze the effect of technological change in a novel framework that integrates an economy’s skill distribution with its occupational and industrial structure. Individuals become managers or workers based on their managerial vs. worker skills, and workers further sort into a continuum of tasks (occupations) ranked by skill content. Our theory dictates that faster technological progress for middle-skill tasks not only raises the employment shares and relative wages of lower- and higher-skill occupations among workers (horizontal polarization), but also raises those of managers over workers as a whole (vertical polarization). Both dimensions of polarization are faster within sectors that depend more on middle-skill tasks and less on managers. This endogenously leads to faster TFP growth of such sectors, whose employment and value-added shares shrink if sectoral goods are complementary (structural change). We present several novel facts that support our model, followed by a quantitative analysis showing that task-specific technological progress—which was fastest for occupations embodying routine-manual tasks but not interpersonal skills—is important for understanding changes in the sectoral, occupational, and organizational structure of the U.S. economy since 1980.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Faster technological progress for middleskill tasks (O49) | Higher employment shares for lower and higher-skill occupations (J29) |
| Faster technological progress for middleskill tasks (O49) | Higher wages for lower and higher-skill occupations (J31) |
| Faster technological progress for middleskill tasks (O49) | Horizontal polarization (L41) |
| Faster technological progress for middleskill tasks (O49) | Increased relative wages of managers compared to workers (J31) |
| Faster technological progress for middleskill tasks (O49) | Vertical polarization (L98) |
| Faster technological progress for middleskill tasks (O49) | Faster TFP growth in sectors utilizing middleskill tasks (O49) |
| Faster TFP growth in sectors utilizing middleskill tasks (O49) | Structural changes in the economy (L16) |