Evidence that the automation of routine tasks has contributed to the polarization of labor markets has been documented for many developed economies, but little is known about its incidence in developing economies. We propose a measure of the exposure to routinization—that is, the risk of the displacement of labor by information technology—and assemble several facts that link the exposure to routinization with the prospects of polarization. Drawing on exposures for about 85 countries since 1990, we establish that: (1) developing economies are significantly less exposed to routinization than their developed counterparts; (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 strong and subsequent exposures have fallen; while among those with low initial exposure, the globalization of trade and structural transformation have prevailed and routine exposures have risen. Although we find little evidence of polarization in developing countries thus far, with rapidly rising exposures to routinization, the risks of future labor market polarization have escalated with potentially significant consequences for productivity, growth and distribution.
European economies ( Spitz-Oener 2006 ; Autor and Dorn 2013 ; Michaels, Natraj and Van Reenen 2013 ; Goos et. al. 2014 ; Ikenaga and Kamibayashi 2016 ). To date, however, much less is known about the incidence of routinization in developing economies, and whether the worldwide diffusion of advances in information technology has, or will, affect the structure of employment or wages, or result in polarizing their labor markets.
Our paper makes three contributions to this literature. First, we document the exposuretoroutinization in a large number of economies. By
The paper examines the evolution and drivers of labor force participation in European regions, focusing on the effects of trade and technology. As in the United States, rural regions within European countries saw more pronounced declines (or smaller increases) in participation than urban regions. Unlike in the United States, however, trade and technology, captured here using novel measures of initial exposures to routinization and offshoring, did not result in detachment from the workforce in European regions. Instead, regions with high initial exposures to routinization and offshoring experienced so-far larger increases in participation, likely driven by an added second worker effect.
The United States stands out among advanced economies with marked declines in labor force participation. National averages furthermore conceal considerable within-country heterogeneity. This paper explores regional differences to shed light on drivers of participation rates at the state and metropolitan area levels. It documents a broad-based decline, especially pronounced outside metropolitan areas. Using novel measures of local vulnerability to trade and technology it finds that metropolitan areas with higher exposures to routinization and offshoring experienced larger drops in participation in 2000-2016. Thus, areas with different occupational mixes can experience divergent labor market trajectories as a result of trade and technology.
automation and offshoring. In particular, the paper first examines to what extent the increase in participation rates observed in most European countries was uniform within each country, or whether there is evidence of significant regional effects. Second, using variation across Europe’s subnational regions in demographic shifts, cyclical conditions, and education, it teases out the role of aging, educational gains, and economic growth. Finally, the paper builds novel measures of regional exposuretoroutinization and offshoring based on the occupational structure of the
area levels, and (2) focusing on the roles of trade and technology, relying on novel measures of local exposuretoroutinization and offshoring.
The paper documents a broad-based decline in participation across states and metropolitan areas, though with especially pronounced drops outside metropolitan areas. It finds that alongside the well-documented effects of aging, trade and technology also played important roles. The aim of the empirical approach is not to precisely disentangle the relative contribution of trade versus technology—these are difficult to
Mai Dao, Ms. Mitali Das, Zsoka Koczan, and Weicheng Lian
This paper documents the downward trend in the labor share of global income since the early 1990s, as well as its heterogeneous evolution across countries, industries and worker skill groups, using a newly assembled dataset, and analyzes the drivers behind it. Technological progress, along with varying exposure to routine occupations, explains about half the overall decline in advanced economies, with a larger negative impact on middle-skilled workers. In emerging markets, the labor share evolution is explained predominantly by global integration, particularly the expansion of global value chains that contributed to raising the overall capital intensity in production.
Mai Dao, Ms. Mitali Das, Zsoka Koczan, and Weicheng Lian
incentives to replace labor with capital ( Karabarbounis and Neiman 2014 ). 7 The paper makes two key contributions on this front. First, it explores whether the rapid advance in information and communications technology, which underpins much of the decline in the price of investment goods, has lowered labor shares by encouraging the automation of routine tasks. 8 To this end, the paper introduces measures of exposuretoroutinization to assess whether the declining price of investment has led to a greater decline in labor shares in more exposed countries and industries