Are Robots, Software, ICT and physical capital related to productivity? A panel quantile approach

With Tiago Sequeira

We study comparable elasticities of labor productivity on Robots, ICT, Non-ICT and Software for the whole conditional distribution of labor productivity through quantile regression analysis. When considering both country-industry fixed-effects and IV approaches, we obtain an increasing elasticity of labor productivity with respect to robot density across the main deciles of the labor productivity distribution. On average, a 1% increase in robot density is associated with nearly 0.15% increase at the 1st decile with nearly 0.17% at the 9th decile of productivity, an effect that is nearly nonsignificant within manufacturing and is crucially dependent on the lower robotized sectors. The elasticity of labor productivity to non-ICT capital (about 0.4%) and software (reaching 0.23%) are shown to be higher than that towards robots. Also the elasticities towards ICT and software vary more across the productivity distribution – presenting a downward slope – than those towards robots and physical capital. This may indicate an association of ICT and software technologies with decreasing inequality and of Robots with increasing inequality.

Robots at work: New evidence with recent data

With Tiago Sequeira

We reassess the relationship between robotization and the growth in labor productivity with more recent data. We discover that the effect of robot density in the growth productivity substantially decreased in the post-2008 period. In this period, the lower positive effect of robot density in the growth of labor productivity is less dependent on the increase in value added. The data analysis dismisses any positive effect of robotization on hours worked. Results are confirmed by several robustness checks, cross-sectional (and panel-data) Instrumental Variable and quantile regression analysis. By means of the quantile regression analysis, we learn that the effect of robots on labor productivity is stronger for low productivity sectors and that in the most recent period, the effect of robotization felt significantly throughout the distribution. This highlights one of the possible sources of stagnation in the era of robotization and have implication both for labor market and R&D policies.

Technological knowledge and wages: from skill premium to wage polarization

With Óscar Afonso and Tiago Sequeira

This paper studies the impact of automation shocks on the technological-knowledge level, skill premium (or wage inequality), real prices, output, and economic growth. To highlight the economic mechanisms, we devise a task-based direct technical change model that allows us to analyze the determinants of the threshold task, the relative output and prices between sectors, intra- and inter-sectoral wage differences, wage polarization and economic growth rates. We observe that an increase in the efficiency of skilled or unskilled workers as well as a decrease in the efficiency of medium-skilled workers as possible result of automation always increase wage polarization as well as economic growth rates. In a quantitative exercise we also assess the change in the weight of routine and non-routine sectors in the economy. In this context, governments should implement policies to support the professional transition of medium-skilled workers to non-routinizable tasks.

Human Capital Disparities and Earnings Inequality in The Portuguese Private Labour Market

With João Sousa Andrade, Adelaide Duarte and Marta Simões

 

This paper examines human capital inequality and how it relates to earnings inequality in Portugal using data from Quadros de Pessoal for the period 1986–2017. The objective is threefold: (i) show how the distribution of human capital has evolved over time; (ii) investigate the association between human capital inequality and earnings inequality; and (iii) analyse the role of returns to schooling, together with human capital inequality, in the explanation of earnings inequality. Our findings suggest that human capital inequality, computed based on the distribution of average years of schooling of employees working in the Portuguese private labour market, records a positive trend until 2007 and decreases from this year onwards, suggesting the existence of a Kuznets curve of education relating educational attainment levels and education inequality. Based on the decomposition of a Generalized Entropy index (Theil N) for earnings inequality, we observe that inequality in the distribution of human capital plays an important role in the explanation of earnings inequality, although this role has become less important over the last decade. Using Mincerian earnings regressions to estimate the returns to schooling together with the Blinder-Oaxaca decomposition of real hourly earnings we confirm that there are two important forces associated with the observed decrease in earnings inequality: a reduction in education inequality and compressed returns to schooling, mainly in tertiary education.