Abstract:
Yoon Lee and Shin (2017) analyze the effect of technological change in a novel framework that integrates an
economy's skill distribution with its occupational and industrial structure. Individuals
become managers or workers based on their managerial vs. worker skills, and workers
further sort into a continuum of tasks (occupations) ranked by skill content. Their
theory dictates that faster technological progress for middle-skill tasks not only raises
the employment shares and relative wages of lower- and higher-skill occupations among
workers (horizontal polarization), but also raises those of managers over workers as a
whole (vertical polarization). Both dimensions of polarization are faster within sectors
that depend more on middle-skill tasks and less on managers. This endogenously leads
to faster TFP growth of such sectors, whose employment and value-added shares shrink
if sectoral goods are complementary (structural change). The authors present several novel
facts that support our model, followed by a quantitative analysis showing that task-specific technological progress - which was fastest for occupations embodying routine-manual
tasks but not interpersonal skills - is important for understanding changes in
the sectoral, occupational, and organizational structure of the U.S. economy since 1980.