DP12663 Disentangling Occupation- and Sector-specific Technological Change

Author(s): Zsofia Barany, Christian Siegel
Publication Date: January 2018
Keyword(s): biased technological change, employment polarization, structural change
JEL(s): J24, O33, O41
Programme Areas: Macroeconomics and Growth
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12663

To study the drivers of the employment reallocation across sectors and occupations between 1960 and 2010 in the US we propose a model where technology evolves at the sector-occupation cell level. Since the framework does not a priori impose a specific form of technological change, it allows us to quantify the respective role of sector-specific and of occupation-specific technological change. We implement a novel method to extract changes in sector-occupation cell productivities from the data. Using a factor model we find that occupation and sector factors jointly explain 74-87 percent of cell productivity changes, with the occupation component being by far the most important. While in our general equilibrium model both factors imply similar reallocations of labor across sectors and occupations, quantitatively the bias in technological change across occupations is much more important than the bias across sectors.