Working Paper: CEPR ID: DP14787
Authors: Ester Faia; Sebastien Laffitte; Max Mayer; Gianmarco Ottaviano
Abstract: We show, theoretically and empirically, that the effects of technological change associated with automation and offshoring on the labor market can substantially deviate from standard neoclassical conclusions when search frictions hinder efficient assortative matching between firms with heterogeneous tasks and workers with heterogeneous skills. Our key hypothesis is that better matches enjoy a comparative advantage in exploiting automation and a comparative disadvantage in exploiting offshoring. It implies that automation (offshoring) may reduce (raise) employment by lengthening (shortening) unemployment duration due to higher (lower) match selectivity. We find empirical support for this implication in a dataset covering 92 occupations and 16 sec- tors in 13 European countries from 1995 to 2010.
Keywords: automation; offshoring; two-sided heterogeneity; positive assortativity; wage inequality; horizontal specialization; core-task-biased technological change
JEL Codes: O33; O47; F16; F66; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| automation (L23) | reduced employment (J63) |
| offshoring (F23) | increased employment (J68) |
| increased selectivity (C34) | increased unemployment duration (J64) |
| decreased selectivity (C34) | decreased unemployment duration (J64) |
| automation (L23) | increased selectivity (C34) |
| offshoring (F23) | decreased selectivity (C34) |
| automation increases productivity of ideal matches (L23) | lower employment (J63) |
| offshoring increases productivity of less-than-ideal matches (J24) | higher employment (J68) |
| automation (L23) | greater wage inequality (J31) |
| offshoring (F23) | lower wage inequality (J31) |
| limited automation and offshoring (L23) | increased employment (J68) |
| advanced automation and offshoring (O14) | decreased employment (J63) |
| higher selectivity (C24) | reduced employment (J63) |