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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Main Author:	Kindberg-Hanlon, Gene
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2021
Subjects:	AUTOMATION EMPLOYMENT PRODUCTIVITY TECHNOLOGY SHOCK SVAR EMERGING MARKET ECONOMIES TECHNOLOGY ADOPTION LABOR MARKET INDUSTRIAL EMPLOYMENT
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

id	okr-10986-35102
recordtype	oai_dc
spelling	okr-10986-351022022-09-20T00:10:48Z The Technology-Employment Trade-Off : Automation, Industry, and Income Effects Kindberg-Hanlon, Gene AUTOMATION EMPLOYMENT PRODUCTIVITY TECHNOLOGY SHOCK SVAR EMERGING MARKET ECONOMIES TECHNOLOGY ADOPTION LABOR MARKET INDUSTRIAL EMPLOYMENT 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. 2021-02-04T15:40:12Z 2021-02-04T15:40:12Z 2021-01 Working Paper http://documents.worldbank.org/curated/en/595681611845186942/The-Technology-Employment-Trade-Off-Automation-Industry-and-Income-Effects http://hdl.handle.net/10986/35102 English Policy Research Working Paper;No. 9529 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	AUTOMATION EMPLOYMENT PRODUCTIVITY TECHNOLOGY SHOCK SVAR EMERGING MARKET ECONOMIES TECHNOLOGY ADOPTION LABOR MARKET INDUSTRIAL EMPLOYMENT
spellingShingle	AUTOMATION EMPLOYMENT PRODUCTIVITY TECHNOLOGY SHOCK SVAR EMERGING MARKET ECONOMIES TECHNOLOGY ADOPTION LABOR MARKET INDUSTRIAL EMPLOYMENT Kindberg-Hanlon, Gene The Technology-Employment Trade-Off : Automation, Industry, and Income Effects
relation	Policy Research Working Paper;No. 9529
description	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.
format	Working Paper
author	Kindberg-Hanlon, Gene
author_facet	Kindberg-Hanlon, Gene
author_sort	Kindberg-Hanlon, Gene
title	The Technology-Employment Trade-Off : Automation, Industry, and Income Effects
title_short	The Technology-Employment Trade-Off : Automation, Industry, and Income Effects
title_full	The Technology-Employment Trade-Off : Automation, Industry, and Income Effects
title_fullStr	The Technology-Employment Trade-Off : Automation, Industry, and Income Effects
title_full_unstemmed	The Technology-Employment Trade-Off : Automation, Industry, and Income Effects
title_sort	technology-employment trade-off : automation, industry, and income effects
publisher	World Bank, Washington, DC
publishDate	2021
url	http://documents.worldbank.org/curated/en/595681611845186942/The-Technology-Employment-Trade-Off-Automation-Industry-and-Income-Effects http://hdl.handle.net/10986/35102
_version_	1764482329027280896

The Technology-Employment Trade-Off : Automation, Industry, and Income Effects

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