Low-Skill and High-Skill Automation
We present a task-based model in which high- and low-skill workers compete against machines in the production of tasks. Low-skill (high-skill) automation corresponds to tasks performed by low-skill (high-skill) labor being taken over by capital. Automation displaces the type of labor it directly affects, depressing its wage. Through ripple effects, automation also affects the real wage of other workers. Counteracting these forces, automation creates a positive productivity effect, pushing up the price of all factors. Because capital adjusts to keep the interest rate constant, the productivity effect dominates in the long run. Finally, low-skill (high-skill) automation increases (reduces) wage inequality.
This paper is prepared for the special issue of the Journal of Human Capital in honor of Gary Becker. We thank two anonymous referees and the editor, Isaac Ehrlich, for useful comments. Financial support from the Sloan Foundation, Smith Richardson Foundation, and Google are gratefully acknowledged. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.