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Technological Unemployment Revisited: Automation in a Search and Matching Framework

Dario Cords and Klaus Prettner ()

No 308, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: Will low-skilled workers be replaced by automation? To answer this question, we set up a search and matching model that features two skill types of workers and includes automation capital as an additional production factor. Automation capital is a perfect substitute for low-skilled workers and an imperfect substitute for high-skilled workers. Using this type of model, we show that the accumulation of automation capital decreases the labor market tightness in the low-skilled labor market and increases the labor market tightness in the high-skilled labor market. This leads to a rising unemployment rate and falling wages of low-skilled workers and a falling unemployment rate and rising wages of high-skilled workers. In a cali- bration to German data, we show that one additional industrial robot causes a loss of 1.66 low-skilled manufacturing jobs, whereas the additional robot creates 3.42 high-skilled manufacturing jobs. Thus, overall employment even rises with automation.

Keywords: unemployment; automation; job search; technological progress; inequality; skill premium (search for similar items in EconPapers)
JEL-codes: C78 J63 J64 O33 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-dge, nep-lab, nep-pay and nep-tid
References: View references in EconPapers View complete reference list from CitEc
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