The Exposure to Routinization: Labor Market Implications for Developed and Developing Economies

40 Pages Posted: 1 Aug 2018

See all articles by Mitali Das

Mitali Das

International Monetary Fund (IMF)

Benjamin Hilgenstock

Institute of International Finance

Date Written: June 2018

Abstract

Evidence that the automation of routine tasks has contributed to the polarization of labor markets hasbeen documented for many developed economies, but little is known about its incidence in developingeconomies. We propose a measure of the exposure to routinization-that is, the risk of the displacementof labor by information technology-and assemble several facts that link the exposure to routinizationwith the prospects of polarization. Drawing on exposures for about 85 countries since 1990, we establishthat: (1) developing economies are significantly less exposed to routinization than their developedcounterparts; (2) the initial exposure to routinization is a strong predictor of the long-run exposure; and(3) among countries with high initial exposures to routinization, polarization dynamics have been strongand subsequent exposures have fallen; while among those with low initial exposure, the globalization oftrade and structural transformation have prevailed and routine exposures have risen. Although we findlittle evidence of polarization in developing countries thus far, with rapidly rising exposures toroutinization, the risks of future labor market polarization have escalated with potentially significantconsequences for productivity, growth and distribution.

Keywords: Labor markets, Globalization, Income distribution, Information technology, Employment, Developing countries, Wages, Labor force, Polarization, routine occupations, automation, structural transformation, inequality, General, Trade and Labor Market Interactions, Labor Force and Employment, Size, and Structure, Technological Change: Choices and Consequences

JEL Classification: E00, F16, J00, J21, O33

Suggested Citation

Das, Mitali and Hilgenstock, Benjamin, The Exposure to Routinization: Labor Market Implications for Developed and Developing Economies (June 2018). IMF Working Paper No. 18/135, Available at SSRN: https://ssrn.com/abstract=3221220

Mitali Das (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Benjamin Hilgenstock

Institute of International Finance ( email )

1333 H Street, NW
Suite 800E
Washington, DC 20005-4770
United States

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