Technical Change, International Income Differences and the Effects of De-routinisation on Labour Markets

In my first chapter, we investigate links between routine-biased technical change, the structure of occupational employment, and cross-country income differences. We find a systematic relationship between occupation-specific technologies and GDP per hour worked. More developed economies use technologies that are more routine-biased. The productivity of routine labour is about 14 times higher in the top 25 percent than in the bottom 25 percent of countries ranked by GDP per hour worked. International differences in this routine labour technology by themselves account for about 17 percent of the 90-10 ratio of GDP per hour worked. Eliminating all occupations’ and capital’s technology differences across the world would compress the GDP distribution by 32 to 40 percent. In my second chapter, I show that a mechanism of directed technical change in the spirit of Acemoglu (2002), and assigning to capital deepening a prime role, can provide a plausible explanation of the patterns documented in the first chapter. I find that the documented crosscountry differences in the occupation bias of technology are partially the result of differences in capital accumulation across countries. This implies that allowing for endogenous technologies significantly amplifies the role of international capital differences in explaining cross-country income disparities. Importantly, these differences can account for up to 67% of the variation in income across nations. Apart from the direct impact of capital accumulation on economic growth, I find that capital deepening also influences GDP through a secondary channel. By altering the equilibrium levels of relative factor scarcities. In my third chapter, we analyse the flows of routine workers into and out of formal and informal routine and non-routine occupations over the period 1980-2015 in Chile. Using rich longitudinal data, we reconstruct individuals’ occupational trajectories by classifying individuals based on their ISCO-88 2-digit level occupations into different states on a monthly basis. We f ind that workers in routine manual employment increasingly become non-employed or use informality as a buffer against job loss. The decline in the share of routine occupations is mostly accounted for by a decrease in the inflow transition rate from unemployment, coupled with an increase in the outflow transition rates to unemployment. Lastly, we find that, over time, a larger proportion of individuals who were formally employed in routine manual occupations transit to informal employment after a period of unemployment.