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Rise of the machines: the effects of labor-saving innovations on jobs and wages

Feng, Andy and Graetz, Georg (2015) Rise of the machines: the effects of labor-saving innovations on jobs and wages. CEP Discussion Papers (CEPDP1330). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

How do firms respond to technological advances that facilitate the automation of tasks? Which tasks will they automate, and what types of worker will be replaced as a result? We present a model that distinguishes between a task's engineering complexity and its training requirements. When two tasks are equally complex, firms will automate the task that requires more training and in which labor is hence more expensive. Under quite general conditions this leads to job polarization, a decline in middle wage jobs relative to both high and low wage jobs. Our theory explains recent and historical instances of job polarization as caused by labor-replacing technologies, such as computers, the electric motor, and the steam engine, respectively. The model makes novel predictions regarding occupational training requirements, which we find to be consistent with US data.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: © 2015 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E25 - Aggregate Factor Income Distribution
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J23 - Employment Determination; Job Creation; Demand for Labor; Self-Employment
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M53 - Training
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O33 - Technological Change: Choices and Consequences; Diffusion Processes
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 20 Feb 2015 15:24
Last Modified: 01 Apr 2019 23:06
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/61028

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