Technological unemployment revisited: Automation in a search and matching framework

Dario Cords and Klaus Prettner

No 19-2018, Hohenheim Discussion Papers in Business, Economics and Social Sciences from University of Hohenheim, Faculty of Business, Economics and Social Sciences

Abstract: Will low-skilled workers be replaced by automation? To answer this question, we set up a search and matching model that features two skill types of workers and includes automation capital as an additional production factor. Automation capital is a perfect substitute for low-skilled workers and an imperfect substitute for high-skilled workers. Using this type of model, we show that the accumulation of automation capital decreases the labor market tightness in the low-skilled labor market and increases the labor market tightness in the high-skilled labor market. This leads to a rising unemployment rate of low-skilled workers and a falling unemployment rate of high-skilled workers. In addition, automation leads to falling wages of low-skilled workers and rising wages of high-skilled workers.

Keywords: unemployment; automation; search and matching model; technological progress; inequality; skill premium (search for similar items in EconPapers)
JEL-codes: C78 J63 J64 O33 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-dge, nep-lab and nep-pay
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Technological unemployment revisited: automation in a search and matching framework (2022)
Working Paper: Technological Unemployment Revisited: Automation in a Search and Matching Framework (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hohdps:192018

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