the race between machine and man: implications of technology …mkredler/readgr/... · 2017. 5....

The Race Between Machine and Man:Implications of Technology for Growth, Factor

Shares and Employment.NBER Working Paper No. 22252 - Issued May 2016

Daron Acemoglu and Pascual Restrepo

Presented by Sergio FeijooUC3M Macro Reading Group

May 10, 2017

Motivation

• Accelerated automation of tasks performed by human labor raisesconcerns about making labor redundant.

• Decline in labor share often related with increase in automation.

Contribution of the paper

Develop a framework where machines replace human labor which allowsto study how this might (or might not) lead to lower employment andstagnant wages.

• Basic idea: 2 types of innovations.

1 Tasks performed by labor are replaced by capital.2 New tasks in which labor has comparative advantage are created.

Figure

Acemoglu and Restrepo (2016). The Race Between Machine and Man. 1 / 15

Static ModelEnvironment

• Capital is fixed and technology is exogenous.

• Final good Y produced combining tasks ypiq

Y “

ˆż N

N´1ypiq

σ´1σ di

˙

σσ´1

• Each task is produced combining `piq or kpiq with a task-specificintermediate qpiq.

• All tasks can be produced by `piq. Assume DI P rN ´ 1,Ns s.t.tasks i ď I can be automated. Then

ypiq “ B”

ηqpiqζ´1ζ ` p1´ ηqr1pi ď I qkpiq ` γpiq`piqs

ζ´1ζ

ı

ζζ´1

where γpiq is productivity of labor in task i .



• Assume γpiq strictly increasing:• Labor has strict comparative advantage in tasks with high index.• In equilibrium D threshold I˚ ď I s.t. i ď I˚ are automated and i ą I˚

are produced with labor.

• Employment level given by quasi-labor supply

Lsˆ

W

RK

˙

Assumption: increasing on wage W relative to capital payments RK .

• Market clearing

ż N

N´1kpiqdi “ K and

ż N

N´1`piqdi “ Ls

ˆ

W

RK

˙



Figure 1: Task space. Introducing new complex tasks (middle), automatingexisting tasks (bottom).


Static ModelEquilibrium

• Tasks are produced competitively, hence ppiq must be equal to theminimum unit cost of production:

cup¨q ” ppiq “

$

’

’

’

&

’

’

’

%

„

´

η1´η

¯ζψ1´ζ `

´

min!

R, Wγpiq

)¯1´ζ

11´ζ

if i ď I

„

´

η1´η

¯ζψ1´ζ `

´

Wγpiq

¯1´ζ

11´ζ

if i ą I

• Since γpiq is increasing, DI s.t. if I ď I firms are indifferent betweenusing capital or labor, i.e.

W

R“ γpI q (1)

• Equilibrium threshold I ˚ “ mintI , I u.



• Production of task ypiq. Demand for factors @i

qpiq “ ypiq

ˆ

η

1´ η

˙ζ

ppiqζψ´ζ

`piq “ ypiqγpiqζ´1ppiqζW´ζ

and for i ď Ikpiq “ ypiqppiqζR´ζ

• Production of Y . Demand for task i

ypiq “ Yppiq´σ

also can be expressed as

ypiq “

$

&

%

Ycu´

min!

R, Wγpiq

)¯´σif i ď I

Ycu´

Wγpiq

¯´σif i ą I



• Demand for factors in terms of I ˚

kpiq “

#

YcupRqζ´σR´ζ if i ď I ˚

0 if i ą I ˚

and

`piq “

$

&

%

0 if i ď I ˚

Y γpiqζ´1cu´

Wγpiq

¯ζ´σW´ζ if i ą I ˚

• Capital and labor market clearing

ż I˚

N´1YcupRqζ´σR´ζdi “ K (2)

ż N

I˚

Y γpiqζ´1cuˆ

W

γpiq

˙ζ´σ

W´ζdi “ Lsˆ

W

RK

˙

(3)



• Substitution between factors and intermediates makes the relativedemands for factors non-homothetic.

• Automation may end up raising the demand for labor more than thedemand for capital.

• Focus on case in which, given factor proportions, automationreduces the relative demand for labor.

Assumption 1

One of the following conditions must hold:

•ˆ

γpN ´ 1q

γpNq

˙2`σ`η

ą |σ ´ ζ|, (σ close to ζ)

• ζ Ñ 1, (task production function is Cobb-Douglas)

• η Ñ 0, (share of intermediates small)



Proposition 1 (Equilibrium in the static model)

Suppose Assumption 1 holds. Then given a range of tasks rN,N ´ 1s,automation technology I P pN ´ 1,Ns, and fixed capital stock K , there D!equilibrium with W , R and thresholds I and I ˚ s.t.:

1 I is determined by (1) and I ˚ “ mintI , I u.

2 All i ď I ˚ are produced with capital and all i ą I ˚ are produced usinglabor,

3 Markets clear,

4 Factor prices satisfy the ideal price index condition

pI ˚ ´ N ` 1qcupRq1´σ `

ż N

I˚

cuˆ

W

γpiq

˙1´σ

di “ 1 (4)



Figure 2: Static equilibrium. Allocation of factors constrained by technology.



Figure 3: Static equilibrium. Allocation of factors not constrained by technology.



Proposition 2 (Comparative statics)

Suppose Assumption 1 holds.

• If I ˚ “ I ă I (constrained by technology), then

d lnpW {Rq

dIă 0 and

d lnpW {Rq

dNą 0

• If I ˚ “ I ă I (not constrained by technology), then

d lnpW {Rq

dI“ 0 and

d lnpW {Rq

dNą 0

Moreover, in both cases the labor share and employment move in the samedirection as ω.


Dynamic ModelSketch of environment and results

• Accumulation of capital determined by savings of a representative HH.

• Main results:• Prove existence of BGP when automation and creation of new

tasks grow at the same rate.• Continuous automation is compatible with balanced growth.

• Productivity Effect: Suppose automation runs ahead of the creationof news tasks.

• Short run effect same as in static model (capital is fixed).• Negative impact of automation on equilibrium wage level disappears in

the long run (capital adjusts to keep interest rate constant).• Automation, by enabling the substitution of the cheaper capital for

labor, increases productivity and thus the demand for labor andwages.

• In any case, in the long run both labor share and employment decreasewith automation.


Full ModelSketch of environment and results

• Endogenize the pace at which automation and the creation of newcomplex tasks proceeds.

• New intermediates can be introduced by technology monopolists.

• Main results:• Prove existence of BGP which is asymptotically and globally

stable (under more stringent assumptions that dynamic model).• Continuous automation is compatible with balanced growth.

• Welfare:• Equilibrium features too much automation vs. Planner’s problem.• Encouraging the creation of new tasks improves welfare.


Summary / Conclusions

• Develop a task-based framework where machines replace humanlabor, and at the same time new complex labor intensive tasks arecreated.

• Automation is modelled as the (endogenous) expansion of the set oftasks that can be performed by capital.

• Static model (fixed capital):• Increase of automation (may) reduce wages, labor share and

employment.

• Dynamic/Full model:• Continuous automation consistent with BGP.• Automation not welfare improving: higher wages, but lower

employment and labor share.


New Job Creation Back

administrators and analysts, meeting planners or computer support specialists. Indeed, during the

last 30 years, new tasks and new job titles account for a large fraction of U.S. employment growth. To

document this fact, we use data from Lin (2011) that measures the share of new job titles—in which

workers perform newer tasks than those employed in more traditional jobs—within each occupation. In

2000, about 70% of the workers employed as computer software developers (an occupation employing

one million people at the time) held new job titles. Similarly, in 1990 a radiology technician and

in 1980 a management analyst were new job titles. Figure 1 shows that for each decade since 1980,

employment growth has been greater in occupations with more new job titles. The regression line shows

that occupations with 10 percentage points more new job titles at the beginning of each decade grow

5.05% faster over the next 10 years (standard error=1.3%). From 1980 to 2007, total employment in

the U.S. grew by 17.5%. About half (8.84%) of this growth is explained by the additional employment

growth in occupations with new job titles relative to a benchmark category with no new job titles.2

-200

-150

-100

-50

050

100

150

200

Per

cent

chan

ge

in e

mplo

ymen

t gro

wth

by

dec

ade

0 20 40 60 80Share of new job titles at the beginning of each decade

From 1980 to 1990 From 1990 to 2000 From 2000 to 2007

Figure 1: Employment growth by decade plotted against the share of new job titles at the beginning of each decade for

330 occupations. Data from 1980 to 1990 (in dark blue), 1990 to 2000 (in blue) and 2000 to 2007 (in light blue, re-scaled

to a 10-year change). Data source: See Appendix B.

We start with a static model in which capital is fixed and technology is exogenous. There are

two types of technological changes: the automation of existing tasks and new complex tasks in which

labor has a comparative advantage. Our static model provides a rich but tractable framework to study

how automation and the creation of new complex tasks impact factor prices, factor shares in national

income and employment. Automation allows firms to produce tasks previously performed by labor

2The data for 1980, 1990 and 2000 are from the U.S. Census. The data for 2007 are from the American Community

Survey. Additional information on the data and our sample is provided in Appendix B, where we also document in detail

the robustness of the relationship depicted in Figure 1.

2

Figure 4: Employment growth by decade plotted against the share of new jobtitles at the beginning of each decade for 330 occupations.

Acemoglu and Restrepo (2016). The Race Between Machine and Man.

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