Pathfinding Paper 2

Occupational choices, technology and structural change – Julieta Caunedo, Elisa Keller and Yongseok Shin  

Structural transformation changes the labour and skills demanded across sectors. As developed economies became richer they saw the employment share in agriculture fall, the employment share in manufacturing first rise and later fall, and the employment share in services rise steadily. A key driver of these trends is technology, which also shapes the tasks workers perform and the inputs workers employ, particularly capital. These shifts in technology had important implications for labour market opportunities of workers with different skills. But today’s developing countries do not seem to conform to the patterns of sectorial reallocation previously observed.

In the developing world, changes in the occupational structure that accompany structural change and technology advancement is a relatively unexplored topic. Are workers in poorer countries differentially exposed to technological change than in richer countries? How does this differential exposure to technical change affect the speed of structural transformation? What are the implications of differential workers' exposure to technological change for job polarization as technology replaces middle-skill occupations and generates demand for low- and high-skilled labour?

This line of research has first order implications for policy design in the developing world. Understanding the consequences of technological change for inequality as the economies develop can shed light on the design of social safety nets. Exploring how human capital choices respond to labour substitution by machines and which workers are most affected may help the design of training programs. Studying the impact of technological change on the gender gap and labour market opportunities for women is a key input into women empowerment policies. This pathfinding paper will consider these issues and set an agenda for future research in the area.