Looking ahead at the effects of automation in an economy with matching frictions

Luis Guimarães and Pedro Gil

MPRA Paper from University Library of Munich, Germany

Abstract: We study the effects of an automation-augmenting shock in an economy with matching frictions and endogenous job destruction. In the model, tasks can be produced by workers or by machines, but workers have a comparative advantage in producing advanced tasks. Firms choose the input at the time of entry. And according to the evolution of the workers’ comparative advantage, some firms using labor prefer to fire the worker and automate the task. In our model, an automation-augmenting shock reduces the labor share, increases job creation, and increases job destruction. The effects on employment depend on how rapidly workers may lose their comparative advantage: an automation-augmenting shock increases employment in slow-changing environments but catastrophically reduces it in rapid-changing ones.

Keywords: Automation; Employment; Labor-Market Frictions; Technology Choice (search for similar items in EconPapers)
JEL-codes: E24 J64 L11 O33 (search for similar items in EconPapers)
Date: 2019-09-27
New Economics Papers: this item is included in nep-lab, nep-mac and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Looking ahead at the effects of automation in an economy with matching frictions (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:96238

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