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Lecture 13
Skills, tasks & technologies
Main reference: Acemoglu & Autor,
Handbook of Labor Economics, vol 4
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Canonical model
Two skill groups: high skill & low skill
Skill groups imperfect substitutes inproduction
Technology factor augmenting, complementseither high-skill or low skill workers
Wage differences (and return to education)depend on changes in relative supply and
speed of technological change (race betweeneducation and technology)
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Canonical model, implications
Changes in supply affect relative wages
Skill-biased technological change increases
relative productivity of high skill workers and
increases wage differences across groups
Increase in productivity of one group will
increase wages in all groups
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Goldin & Katz
Canonical model provides a good account for
changes in return to schooling and demand
for skills in the US
Increase in return to education partly due toless rapid expansion of education after 1980s
and partly to increased speed of technological
change
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Acemoglu & Autor
Canonical model not sufficient
No role for tasks
Some core tasks have become easy to offshore
This can lead to polarization in the labor market if the
offshored tasks previously performed by middle skill workers
Technological change is not exogeneous and not
necessarily skill-biased
Goldin & Katz : 19th century tech change skill substituting
Acemoglu: Technology endogenous response to labormarket changes
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Acemoglu & Autor
Canonical model hard to fit with facts
Does not explain the decline in real wages of low-
skill worker groups despite of falling supply
Does not explain polarization in the labor market
Cannot explain why occupations have become
more important or why occupational structure has
changed
No role for outsourcing or task replacingtechnologies (computers)
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Application for Finland, Mitrunen 2013
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Changes in occupational structutre,
Data source: palkkarakennetilasto
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Acemoglu & Autor
Three skill-groups: low, middle & high
Continium of tasks, ordered by complexity (i)
High skill workers have a relative advantage in morecomplex tasks
In equilibrium tasks iIH
performed by high skill group and remainingintermediate tasks by middle-skill group
Law of one price: workers of same skill group receivesame pay in all tasks
IH determined so that costs of performing task
IHissame with high vs. middle skill labor. Similarly for I
L
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Implications
Increase in supply of high skills (or increase ineffective supply due to productivity increase)
Reduces IHi.e. increases the range of tasks
performed by high skill workers Creates an excess supply of middle skill
workrers, and therefore reduces ILinducing
firms to substitute middle skill workers totasks previously performed by low skillworkers
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Implications 2: task replacing
technologies
Technological change can replace some tasks
previously produced by certain worker group
by machines
This reduces the wage of the skill group
And widens the range of tasks performed by this
group