Technology and labor markets

Abstract

This thesis is divided in three chapters. The first two chapters explore the role of structural changes and skill mismatches in generating unemployment. In the first chapter, I present a model in which technological change creates a mismatch between the skill requirements in novel jobs and workers' current skills. Although the economy adjusts as workers are retrained and learn these skills, I argue that the adjustment may be sluggish and inefficient. Moreover, along this adjustment the economy becomes more responsive to aggregate shocks. The key mechanism behind these results is that, due to matching frictions and because skills are not yet standardized, firms face a high cost to recruit workers with the requisite skills for novel jobs and they respond by creating fewer novel jobs. In the second chapter, I document that the decline in routine-cognitive jobs outside manufacturing-a pervasive structural change that has affected U.S. labor markets since the mid 90s-accelerated during the Great Recession and contributed to the long-lasting increase in unemployment since 2007. I show that the local labor markets that were more exposed to this structural change experienced worst outcomes during the Great Recession. Moreover, at the local labor market, this structural change interacted with temporal shocks to the demand for goods and services. In the third chapter, which is joint work with Daron Acemoglu, we study how the automation of jobs performed by labor affects employment, wages and the share of labor in national income.