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Full-Text Articles in Business
The Remainder Effect: How Automation Complements Labor Quality, James Bessen, Erich Denk, Chen Meng
The Remainder Effect: How Automation Complements Labor Quality, James Bessen, Erich Denk, Chen Meng
Faculty Scholarship
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.
Ai And Jobs: The Role Of Demand, James Bessen
Ai And Jobs: The Role Of Demand, James Bessen
Faculty Scholarship
In manufacturing, technology has sharply reduced jobs in recent decades. But before that, for over a century, employment grew, even in industries experiencing rapid technological change. What changed? Demand was highly elastic at first and then became inelastic. The effect of artificial intelligence (AI) on jobs will similarly depend critically on the nature of demand. This paper presents a simple model of demand that accurately predicts the rise and fall of employment in the textile, steel, and automotive industries. This model provides a useful framework for exploring how AI is likely to affect jobs over the next 10 or 20 …