Automation and job polarization

Chia-Hui Lu

Journal of Macroeconomics, 2025, vol. 84, issue C

Abstract: By introducing the development of automation into a labor search model with differently skilled workers, this paper finds that increased automation of production processes leads to job polarization. When there is an increase in the degree to which automation and middle-skilled labor can replace each other, firms producing final goods will use automation in place of human labor rather than the other way around. In economies where people can acquire skills and make endogenous occupational choices, government subsidies to cover the learning costs of high-skilled labor enhance output production and household welfare, but increase the degree of job polarization. Furthermore, we find that reducing job polarization is not necessarily beneficial for macroeconomic performance when the government subsidizes the cost of learning for household members to become middle-skilled workers.

Keywords: Automation; Search and matching; Job polarization (search for similar items in EconPapers)
JEL-codes: E24 J24 J64 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:84:y:2025:i:c:s0164070425000102

DOI: 10.1016/j.jmacro.2025.103673

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