DP14787 Automation, Globalization and Vanishing Jobs: A Labor Market Sorting View

Author(s): Ester Faia, Sebastien Laffitte, Max Mayer, Gianmarco Ottaviano
Publication Date: May 2020
Keyword(s): automation, core-task-biased technological change, horizontal specialization, offshoring, positive assortativity, two-sided heterogeneity, Wage inequality
JEL(s): F16, F66, J64, O33, O47
Programme Areas: International Trade and Regional Economics, International Macroeconomics and Finance, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14787

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.