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Routine-Biased Technological Change and Endogenous Skill Investments

Author

Listed:
  • Danyelle Branco
  • Bladimir Carrillo
  • Wilman Iglesias

Abstract

We investigate how individuals alter their educational investments in response to routine-biased technology. We find that individuals growing up in robot-impacted areas are more likely to complete a bachelor's degree and experience a relative increase in earnings. Changes in the skill premium and opportunity cost appear to drive these effects. To interpret these findings, we estimate a model of endogenous skill acquisition where changes in the demand and supply of skills shape the path of earnings. Counterfactual simulations suggest that the endogenous skill response cannot fully undo the adverse earnings effects of automation unless there are sufficiently generous educational subsidies.

Suggested Citation

  • Danyelle Branco & Bladimir Carrillo & Wilman Iglesias, 2025. "Routine-Biased Technological Change and Endogenous Skill Investments," American Economic Journal: Economic Policy, American Economic Association, vol. 17(3), pages 236-280, August.
    • Handle: RePEc:aea:aejpol:v:17:y:2025:i:3:p:236-80
    DOI: 10.1257/pol.20220407
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    References listed on IDEAS

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    1. Bruce E. Hansen, 2001. "The New Econometrics of Structural Change: Dating Breaks in U.S. Labour Productivity," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 117-128, Fall.
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    Cited by:

    1. Xing, Zuge & He, Canfei & Pan, Yuxin, 2026. "Divergent Paths: Unpacking the role of skill-biased and routine-biased technological change on urban income inequality in China," Technological Forecasting and Social Change, Elsevier, vol. 224(C).

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    More about this item

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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