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Title: Technology Adoption and the Evolution of the Labor Market

Citation Type: Miscellaneous

Publication Year: 2013

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Abstract: This paper examines the effect of General Purpose Technologies on the labor market. It provides a theoretical contribution in the context of computers since the 1980s and an empirical contribution in the context of electricity in the 1930s. First, the paper presents a model where the adoption of computers explains both structural and cyclical changes of the US labor market in recent decades. When computers become cheap and competitive compared to workers, they diffuse more rapidly and become more important in the conventional mechanism of capital-labor substitution. The model can account for recent structural changes with this trend of automation: employment has shifted away from routine occupations and the labor share of income has declined. The model also predicts that recessions accelerate this trendfirms prefer to destroy routine jobs during a downturn, when the opportunity cost of restructuring is low. This acceleration can account for recent cyclical changes of the labor market: routine job losses are concentrated in recessions and the ensuing recoveries are jobless. To show causal evidence for the model, the second contribution is to consider the General Purpose Technology of electricity with a newly digitized plant-level dataset for the concrete industry between 1929 and 1935. Unlike computers, electricity prices vary across space depending on the power sourcehydro power or coal power. Using geography as an instrument for shifts in the electricity supply curve, this paper finds that the decrease in the price of electricity caused a decrease in the labor share of income, consistent with the predictions of the model.

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Authors: Morin, Miguel

Publisher: Columbia University

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Other

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