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Accounting for Automation and Offshoring in International Macroeconomic and Employment Dynamics

Federico Mandelman ()

No 546, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: Employment in middle-skill occupations witnessed an outright decline in the US during the last three decades. Middle-skill workers specialize in routine labor tasks which are prone to be automated. In addition, these occupations do not usually require on-site interactions and thus may be offshored overseas. High-skill workers instead execute non-routine cognitive tasks while the low-skilled specialize in on-site service occupations that cannot be automated. Motivated by this evidence, I develop a stochastic growth model of international trade in tasks with the possibility of automation to account for the role of offshoring and computerization in the decline of middle-skill employment. A system based estimation approach which uses disaggregated employment data, trade-weighted international macroeconomic indicators, as well as, alternative proxies for automation and offshoring costs is implemented.

Date: 2017
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