The Effect of Technological and Structural Transformations on the Transferability of Human Capital

Yuchen Guo, Simon Wiederhold

Pillars Report


There is a aggregate decline of manual-routine occupations due to substitution by automation capital, as these occupations perform tasks that can be easily replaced by machines. Similarly, technological progress and reduced trade barriers put occupations at an increased risk of offshoring, as their tasks can be performed abroad. As employment opportunities for workers in manual-routine or offshorable occupations increasingly vanish due to technological change, structural transformation, and changing global value chains, these workers may face particularly difficult transitions on the labor market. Surprisingly, however, evidence on how these groups of workers fare after (technology- or trade-induced) displacement is lacking.

In this report, we empirically investigate the labor market transitions after job displacement of workers who are differently exposed to these labor market trends. At a more fundamental level, our work addresses the question of how capital deepening, embodied technological change, and changing global value chains affect the labor market prospects for different types of workers and generate differential adjustment frictions and reallocation costs.