Technology-Skill Complementarity and Labor Displacement: Evidence from Linking 150 Years of Patents with Occupations

Abstract

We construct occupation-specific indicators of technological change that span two centuries (1850-2010) using textual analysis of patent documents and occupation task descriptions. We find strong evidence that much of technical change has been displacive of labor during this period. Our occupation-level indices are significantly negatively correlated with future employment and wage growth; employment declines are especially pronounced among exposed occupations during innovation waves and around recessions. Aggregating at the industry level, our indices positively predict industry productivity and output but are associated with a decline in the labor share of output. Comparing the recent IT revolution to the Second Industrial Revolution (1880s) and the technology wave of the 1920s and 1930s, our measure uncovers an important difference—the first two waves consisted of innovations that were mainly related to occupations emphasizing (non-interpersonal) manual tasks, while the recent wave is composed of innovations that are significantly more related to cognitive tasks than the previous two waves.

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