The role of technological change in the evolution of the employment to output elasticity

Abstract

Employment to output elasticity has risen from 0.65 during the 1960s and 1970s to 1.25 in the last two decades. We study the role of recent technological change in the evolution of this elasticity throughout the business cycle. Using the COVID-19-induced shock and an instrumental variable approach as sources of identification, we find that recent technologies have increased employment to output elasticity. We find that employment in sectors characterized by occupations at a high risk of automation are the most a!ected and that this effect is larger in sectors that have undergone a technology capital deepening process in the last decades.