Heterogeneous Effects of Capital-Embodied Innovation on Labor Market

Hyejin Park and Younghun Shim

No 11037, CESifo Working Paper Series from CESifo

Abstract: This paper develops an occupation-level measure of Capital-Embodied Innovation (CEI) by matching patents with capital goods based on their text similarity. The impact of CEI on labor demand is heterogeneous, depending on the similarity between capital and occupational tasks. Specifically, CEI associated with task-similar capital reduces the relative labor demand, whereas CEI related to task-dissimilar capital raises it. Between 1980 and 2015, capital used by high-wage occupations experienced more innovations in task-dissimilar capital and fewer in task-similar capital. CEI can explain 51% of the relative wage growth in high-wage occupations and significantly contributes to routine- and abstract-biased labor market changes.

Keywords: capital-embodied innovation; text analysis of patents; substitution between labor and capital (search for similar items in EconPapers)
JEL-codes: J24 J31 O33 O47 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ino, nep-lma and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11037

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