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Heterogeneous Effects of Capital-Embodied Innovation on Labor Market

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  • Hyejin Park
  • Younghun Shim

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.

Suggested Citation

  • Hyejin Park & Younghun Shim, 2024. "Heterogeneous Effects of Capital-Embodied Innovation on Labor Market," CESifo Working Paper Series 11037, CESifo.
    • Handle: RePEc:ces:ceswps:_11037
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    References listed on IDEAS

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    1. Guy Michaels & Ashwini Natraj & John Van Reenen, 2014. "Has ICT Polarized Skill Demand? Evidence from Eleven Countries over Twenty-Five Years," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 60-77, March.
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    More about this item

    Keywords

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    JEL classification:

    • 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
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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