October 28, 2025Journal of Political Economy3 citations
View Full PaperAutomation and Polarization
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Abstract
We develop an assignment model of automation. Each of a continuum of tasks of variable complexity is assigned to either capital or one of a continuum of labor skills. We characterize conditions for interior automation, whereby tasks of intermediate complexity are performed by capital. Interior automation arises when low-skill wages are low and effective cost of capital in low-complexity tasks is high. Minimum wages make interior automation less likely. Higher capital productivity causes employment and wage polarization, changes the skill premium nonmonotonically, and reduces the real wage of workers with comparative advantage profiles close to that of capital.