Technology Adoption and Human Capital Accumulation: An Exactly Solved Framework for Unifying the Empirics on Automation and Education
This paper is a theoretical and numerical investigation into human capital obsolescence. Labor market skills can depreciate in usefulness and relevance very suddenly, for instance through introduction of new technologies or off-shoring of production -- a process referred to as human capital obsolescence. Recently developed task-based frameworks have proven adept at capturing such labor-displacing dynamics alongside the canonical factor-augmenting changes in technology. Nevertheless, none of these models incorporate decisions on human capital investment. Hence, the labor immiseration scenarios predicted so far run contrary to the empirics on the effects of automation. In this study, I remedy this by including considerations of human capital investment based on the conceptual framework of the psychometric literature on skill formation. Moreover, focus of the study is shifted towards institutional adoption of new technologies, rather than their arrival rate. In doing so, the model produces a labor immiseration scenario consistent with routine-biased technological change, supply-side secular stagnation and falling labor share of global income. I plan to explore numerically micro-calibrated heterogeneous-agent macro-model to explore the impulse responses to policies affecting the rate task obsolescence and task creation.