Document Type
Working Paper
Publication Date
2-24-2022
Language
en-US
Abstract
This paper argues that automation both complements and replaces workers. Extending the Acemoglu-Restrepo model of automation to consider labor quality, we obtain a Remainder Effect: while automation displaces labor on some tasks, it raises the returns to skill on remaining tasks across skill groups. This effect increases between-firm pay inequality while labor displacement affects within-firm inequality. Using job ad data, we find firm adoption of information technologies leads to both greater demand for diverse skills and higher pay across skill groups. This accounts for most of the sorting of skills to high paying firms that is central to rising inequality.
Recommended Citation
James Bessen, Erich Denk & Chen Meng,
The Remainder Effect: How Automation Complements Labor Quality
(2022).
Available at:
https://scholarship.law.bu.edu/faculty_scholarship/1358
Included in
Business Law, Public Responsibility, and Ethics Commons, Labor and Employment Law Commons, Law and Economics Commons
