DP15985 Who Produces the Robots?

Author(s): Hans Gersbach, Samuel Schmassmann
Publication Date: March 2021
Keyword(s): skills · technological change · task · complexity · wage inequality
JEL(s): O31, O38
Programme Areas: Labour Economics, Macroeconomics and Growth, Organizational Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15985

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.