Low-Skill and High-Skill Automation
32 Pages Posted: 7 Dec 2017
Date Written: December 4, 2017
We present a task-based model in which high- and low-skill workers compete against machines in the production of tasks. Low-skill (high-skill) automation corresponds to tasks performed by low-skill (high-skill) labor being taken over by capital. Automation displaces the type of labor it directly aﬀects, depressing its wage. Through ripple eﬀects, automation also aﬀects the real wage of other workers. Counteracting these forces, automation creates a positive productivity eﬀect, pushing up the price of all factors. Because capital adjusts to keep the interest rate constant, the productivity eﬀect dominates in the long run. Finally, low-skill (high-skill) automation increases (reduces) wage inequality.
Keywords: automation, factor prices, labor, skills, tasks, wage inequality
JEL Classification: J23, J24
Suggested Citation: Suggested Citation