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Automation, job polarisation, and structural change

Author

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  • Luca Eduardo Fierro

    (Department of Management, Università Politecnica delle Marche, Ancona, Italy)

  • Alessandro Caiani

    (University School for Advanced Studies, Pavia, Italy)

  • Alberto Russo

    (Department of Management, Università Politecnica delle Marche, Ancona, Italy and Department of Economics, Universitat Jaume I, Castellón, Spain)

Abstract

The increasing automation of tasks traditionally performed by labor is reshaping the relationship between skills and tasks of workers, unevenly affecting labor demand for low, middle, and high-skill occupations. To investigate the economywide response to automation, we designed a multisector Agent-Based Macroeconomic model accounting for workers’ heterogeneity in skills and tasks. The model features endogenous skill- biased technical change, and heterogeneous consumption preferences for goods and personal services across workers of different skill types. Following available empirical evidence, we model automation as a manufacture-specific, productivity-enhancing, and skill-biased technological process. We show how automation can trigger a structural change process from manufactory to personal services, which eventually polarises the labor market. Finally, we study how labor market policies can feedback in the model dynamics. In our framework, a minimum wage policy (i) slows down the structural change process, (ii) boosts aggregate productivity, and (iii) accelerates the automation process, strengthening productivity growth within the manufactory sector.

Suggested Citation

  • Luca Eduardo Fierro & Alessandro Caiani & Alberto Russo, 2021. "Automation, job polarisation, and structural change," Working Papers 2021/09, Economics Department, Universitat Jaume I, Castellón (Spain).
  • Handle: RePEc:jau:wpaper:2021/09
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    More about this item

    Keywords

    agent-based model; automation; structural change; wage polarization; minimum wage;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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