Innlegg av Prof David Dorn på NHHs høstkonferanse 29oct

IntroductionTechnology

TradeConclusions

The Labor Market Effects of Technology and TradeShocks in the United States

Prof. Dr. David Dorn

CEMFI Madrid

October 2013

Dorn Technology and Trade


TradeConclusions

Technology and Trade

Key forces shaping labor markets in industrialized nations?

Universal hypothesis: “Technology and Trade”



TradeConclusions

Outline

1Technology

Future: What are economists’ long-term predictions abouttechnological change?

Past: How did technology affect workers over the course ofhistory?

Present: What do we know about the labor market impacts ofthe ongoing “computer revolution”?

2Trade

How does its impact differ from that of technology?

3Conclusions



TradeConclusions

Hypothesis 1: The End of Work?



TradeConclusions

Hypothesis 1: The End of Work?

Source: Time Magazine



TradeConclusions

Hypothesis 2: The End of Technological Change?



TradeConclusions


Source: Gordon (2012)



TradeConclusions


Source: Gordon (2012)



TradeConclusions

A Clash of Predictions

Speculative predictions about future technological change varydramatically:

1 An ever accelerating improvement of computer technology willrapidly lead us to the point where computers dominate mosthuman labor.

2 There is decreasing scope for future innovation, and technologywill have little novel impact on labor markets in the future.



TradeConclusions

From Speculation to Evidence

We can only speculate about the distant future. However, wehave empirical evidence about past experience with technology:

1 What labor market effects of technology did people expect?2 What were the actual impacts?

I will discuss historical technological progress using examplesfrom the textile sector.



TradeConclusions

Technology 1: Hand Spindle

Source: Wikipedia



TradeConclusions

Technology 2: Spinning Wheel (11th-15th Century)

Source: Wikipedia



TradeConclusions

Reaction to the Spinning Wheel: Bans

In 1412, the city council of Cologne prohibited the productionof a spinning wheel by a local craftsman, because it fearedunemployment among textile manufacturers that used thehand spindle.

In the 16th Century, the newly developed ribbon weavingmachines were banned in large parts of Europe.

Source: Prion (1907)



TradeConclusions

Technology 3: Spinning Machine (18th Century)

Source: AP European History



TradeConclusions

Reaction to the Spinning Machine: Protests

Source: Wikipedia



TradeConclusions

Labor Market Impact of Technological Innovation

The spinning machine allowed that one worker produced theamount of yarn previously produced by 200 workers

Nevertheless, technological progress did not induce along-term rise in unemployment!

Why?

1 Creation of new jobs in the “technology sector” (e.g.,production of machines)

2 Falling price of textile allowed consumers to buy more textilesand other goods, thus creating job growth in many sectors ofthe economy



TradeConclusions

The Luddite Fallacy

Predictions of technology-induced long-term unemploymenthave been proven wrong time and again.

The amount and composition of work in the economy is notfixed: While there is ongoing mechanization of jobs, there isalso ongoing creation of new employment opportunities.

At the start of the 20th Century, few would have predictedthat today, employment in banks or hospitals or in theentertainment industry exceeds employment of the entireagricultural sector.



TradeConclusions

The Computer Revolution



TradeConclusions

What Do Computers Do?

Computers execute routines that follow exact procedural rules:

Saving/recalling/transmitting information

CalculationsSteering machines according to a pre-specified program

Computers struggle with task that cannot easily be programedex ante:

Creativity

Social interaction (leadership, negotiations, coaching)Visual and spatial recognition and fine motoric movement



TradeConclusions

“Routine” Occupations Compete with Computers



TradeConclusions

“Abstract” Occupations Benefit from Computers



TradeConclusions

“Manual” Occupations are not Directly Affected



TradeConclusions

“Routine” Occupations Have Middling Wages

Source: Autor and Dorn (2013)



TradeConclusions

Labor Market Polarization: USA 1980-2005

Source: Autor and Dorn (2013)



TradeConclusions

Labor Market Polarization: Europe 1993-2006

Source: Goos, Manning and Salomons (2012)



TradeConclusions

Technology vs Trade

Trade between wealthy countries and less developed countrieshas increased dramatically in the last 20-25 years.

Most of this trade growth is driven by China’s rise as a globalmanufacturing superpower:

Reforms since the 1980s: Special Economic Zones, betteraccess to foreign investment and technology, facilitateddomestic migration

Result: dramatic increase in productivity in certainmanufacturing industries

US is potentially most affected by China because it providesfew exports to China



TradeConclusions

US Trade with China

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$121.6&bil&

$23.0&bil&

$330.0&bil&

$57.4&bil&

$0&bil&

$50&bil&

$100&bil&

$150&bil&

$200&bil&

$250&bil&

$300&bil&

$350&bil&

$400&bil&

Imports& Exports&

Trade&Flows&Between&U.S.&and&&China&(Billions&of&2007&US&Dollars)&

1991& 2000& 2007&

Source: Autor, Dorn and Hanson (2013)



TradeConclusions

Other Countries’ Trade with China

Source: Autor, Dorn and Hanson (2013)Dorn Technology and Trade


TradeConclusions

Measuring the Impacts of Trade and Technology

Autor, Dorn and Hanson (2013) show that exposure to tradeand technology differs across geographic locations in the US:

Some cities are historically specialized in activities that use alot of “routine” occupations, and now face greater exposure tocomputer technology

Others are specialized in manufacturing industries that havebecome strongly exposed to import competition from China

We study the impact of technology and trade exposure on

employment in manufacturing and non-manufacturing jobsemployment in “abstract” (e.g., managerial/professional),“routine” (e.g., clerical/production) and “manual” (e.g.,service/construction) occupations



TradeConclusions

Geography of Technology Exposure

Source:

Autor, Dorn and Hanson (2013)



TradeConclusions

Geography of Trade Exposure

Source:

Autor, Dorn and Hanson (2013)



TradeConclusions

Trade and Technology Impacts in Manufacturing




TradeConclusions

Trade and Technology Impacts in Non-Manufacturing




TradeConclusions

What Do We Learn from the Evidence?

1 A long history shows that technological change (and increasedtrade) does not inevitably create long-term unemployment.

2 However, these forces affect the composition of employment:

polarization of employment due to displacement of “routine”middle-wage occupationsdecline of manufacturing employment due to trade competition

3 Not all displaced workers can easily reallocate to new andattractive jobs.

4 A proactive school and training system should foster thecompetences that are least threatened by computerization andtrade, such as creativity, problem solving, and communication.


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