The Technology-Employment Trade-Off : Automation, Industry, and Income Effects
New technologies can both substitute for and complement labor. Evidence from structural vector autoregressions using a large global sample of economies suggests that the substitution effect dominates in the short-run for over three-quarters of econ...
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/595681611845186942/The-Technology-Employment-Trade-Off-Automation-Industry-and-Income-Effects http://hdl.handle.net/10986/35102 |
| Summary: | New technologies can both substitute for
and complement labor. Evidence from structural vector
autoregressions using a large global sample of economies
suggests that the substitution effect dominates in the
short-run for over three-quarters of economies. A typical 10
percent technology-driven improvement in labor productivity
reduces employment by 2 percent in advanced economies in the
first year and 1 percent in emerging market and developing
economies (EMDEs). Advanced economies have been more
affected by employment-displacing technological change in
recent decades but the disruption to the labor market in
EMDEs has been more persistent. The negative employment
effect is larger and more persistent in economies that have
experienced a larger increase, or smaller fall, in
industrial employment shares since 1990. In contrast,
economies where workers have been better able to transition
to other sectors have benefited more in the medium run from
the positive ``income effect'' of new
technologies. This corresponds with existing evidence that
industrial jobs are most at risk of automation and
reduced-form evidence that more industrially-focused
economies have tended to create fewer jobs in recent
decades. EMDEs are likely to face increasing challenges from
automation as their share of global industry and production
complexity increases. |
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