Working Paper: CEPR ID: DP15985
Authors: Hans Gersbach; Samuel Schmassmann
Abstract: To assess how disruptive automation and digitization could be, we develop a three-industry model involving routine and non-routine production of consumption goods or services, as well as capital good production. Workers exhibit different skill levels and only high-skilled workers can perform non-routine tasks in production. We compare an industrial economy in which the production of capital goods (machines) requires routine tasks with a future economy, the robotic economy, in which the production of capital goods (robots) requires non-routine tasks. We show that in an industrial economy, technological progress in capital production has an equalizing effect on wages and leads to integrated labor markets, whereas in a robotic economy, it can lead to a disintegration of labor markets, with falling real wages for low-skilled workers and increasing real wages for high-skilled workers.
Keywords: skills; technological change; task complexity; wage inequality
JEL Codes: O31; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological progress in capital production (D24) | Integrated labor market (J48) |
| Technological progress in capital production (D24) | Decrease in wage inequality (J31) |
| Technological progress in capital production (D24) | Disintegrated labor market (J46) |
| Disintegrated labor market (J46) | Falling real wages for low-skilled workers (F66) |
| Disintegrated labor market (J46) | Increasing real wages for high-skilled workers (J39) |
| Elasticity of substitution between robots and low-skilled labor > Elasticity of substitution between routine and non-routine task products (D24) | Falling real wages for low-skilled workers and increasing real wages for high-skilled workers (J31) |