Occupational Exposure to Capital-Embodied Technical Change

70 Pages Posted: 11 Feb 2021

See all articles by Julieta Caunedo

Julieta Caunedo

Cornell University

David Jaume

Banco de México

Elisa Keller

University of Exeter; Centre for Economic Policy Research (CEPR)

Date Written: February 2021


Much of technological progress is embodied in capital and realized through the availability of new, more efficient, capital goods. How does capital-embodied technical change (CETC) impacts the labor market? We draw on the idea that workers' occupations are a suitable unit of analysis to address this question and study workers' exposure to CETC at the occupational level. To do so, we construct a novel dataset of the stocks of different types of capital used for production in each occupation. Our dataset yields the first available estimates of CETC and of the elasticity of substitution between capital and labor in each occupation. The latter determines occupational heterogeneity in workers' exposure to CETC, as summarized by the cross-price elasticity of labor demand to the cost of capital. We document that exposure to CETC is U-shaped across occupations ranked by their skill requirements, and jointly with our measures of CETC in each occupation, it rationalizes the occupational employment gains and losses in the US over the last 40 years. We evaluate the impact of CETC in a general equilibrium model of endogenous sorting of workers of different demographic characteristics across occupations of different CETC and equilibrium exposure. We find that CETC explains 91% of labor reallocation in the US between 1982 and 2015. It is responsible for almost all of the gains in employment in high-skill occupations and for 74% of the employment losses in middle-skill occupations.

JEL Classification: O13, O47, Q10

Suggested Citation

Caunedo, Julieta and Jaume, David and Keller, Elisa, Occupational Exposure to Capital-Embodied Technical Change (February 2021). CEPR Discussion Paper No. DP15759, Available at SSRN: https://ssrn.com/abstract=3783985

Julieta Caunedo (Contact Author)

Cornell University ( email )

Ithaca, NY 14853
United States

David Jaume

Banco de México ( email )

Av 5 de Mayo 2
Colonia Cuahtemoc
Ciudad de México, 06000

Elisa Keller

University of Exeter ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

Centre for Economic Policy Research (CEPR)

United Kingdom

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