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CEP discussion paper
Automation, globalization and vanishing jobs: a labor market sorting view
Ester Faia, Sebastien Laffitte, Maximilian Mayer and Gianmarco I. P. Ottaviano May 2020
Paper No' CEPDP1695:
Full Paper (pdf)

JEL Classification: O33; O47; F16; F66; J64

Tags: automation; offshoring; two-sided heterogeneity; positive assortativity; wage inequality; horizontal specialization; core-task-biased technological change

We show, theoretically and empirically, that the effects of technological change associated with automation and offshoring on the labor market can substantially deviate from standard neoclassical conclusions when search frictions hinder efficient assortative matching between firms with heterogeneous tasks and workers with heterogeneous skills. Our key hypothesis is that better matches enjoy a comparative advantage in exploiting automation and a comparative disadvantage in exploiting offshoring. It implies that automation (offshoring) may reduce (raise) employment by lengthening (shortening) unemployment duration due to higher (lower) match selectivity. We find empirical support for this implication in a dataset covering 92 occupations and 16 sectors in 13 European countries from 1995 to 2010.