Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share

Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share. Brookings Institution. David Autor and Anna Salomons. March 8, 2018

 Is automation a labor-displacing force? This possibility is both an age-old concern and at the heart of a new theoretical literature considering how labor immiseration may result from a wave of “brilliant machines,” which is in part motivated by declining labor shares in many developed countries. Comprehensive evidence on this labor-displacing channel is at present limited. Harnessing a model from Acemoglu and Restrepo (2018), the authors first outline the various channels through which automation impacts labor’s share of output. They then turn to empirically estimating the employment and labor share impacts of productivity growth—an omnibus measure of technological change—using data on 28 industries for 18 OECD countries since 1970. Their main findings are that although automation has not been employment-displacing, it has reduced labor’s share in value added. They disentangle the channels through which these impacts come about by considering both the effects occurring within the advancing industry and spillovers onto the industry’s suppliers and customers, and by separately estimating the wage, output, and price responses to automation. Their estimates highlight that the labor share-displacing effects of productivity growth, which were absent in the 1970s, have become more pronounced over time, largely because of a weakening wage response. This finding is consistent with automation having become less labor-augmenting over time. [Note: contains copyrighted material].

 [PDF format, 75 pages].


What Is the U.S. Trade and Development Agency?

What Is the U.S. Trade and Development Agency? Center for Strategic & International Studies. Daniel F. Runde et al. January 30, 2018

 The U.S. Trade and Development Agency (USTDA) is a small independent federal agency whose mission is to help American “companies create U.S. jobs through the export of U.S. goods and services for priority development projects in emerging economies.” USTDA links American businesses to export opportunities in emerging markets by funding activities such as project preparation and partnership building in sectors including transportation, energy, and telecommunications. Since it was established 25 years ago, the agency has generated a total of $61 billion in U.S. exports and supported over 500,000 American jobs. In connecting American business to such opportunities, USTDA also links American technology’s best practices and ingenuity with U.S. trade and development policy priorities.

 USTDA is an instrument to enable American-led infrastructure development in emerging economies and, therefore, frequently sees increasing competition from government-backed Chinese firms and the challenge they can pose to American commercial engagement under the flag of One Belt, One Road (OBOR). OBOR is paving the way for Chinese engineering, procurement, and construction companies to prepare and develop infrastructure projects in OBOR countries in a way that favors Chinese standards, thereby exerting significant pressure to select Chinese suppliers. This creates a potentially vicious cycle—the more China builds, the faster their standards become the international norm, and, ultimately, this cycle could foreclose export opportunities for U.S. businesses and harm American competitiveness in global infrastructure development. U.S. exporters are increasingly requesting USTDA intervention at the pivotal, early stages of a project’s development, to compete in markets, such as the OBOR countries, where they frequently face Chinese competition. Of note, 40 percent of USTDA’s activities in 2016 were in OBOR countries across South and Southeast Asia, Central Asia, the Middle East, and Africa.

 Although there are other agencies that may seem to do work similar to USTDA, there are various aspects that make it a unique agency. This paper provides a brief description of USTDA, its origin and evolution, the impact on the U.S. economy and its proactive collaboration across U.S agencies. Finally, it offers a set of recommendations for USTDA on how to improve its operations and strengthen its role in the developing world. [Note: contains copyrighted material].

 [PDF format, 9 pages].

Tax and Development: New Frontiers of Research and Action

Tax and Development: New Frontiers of Research and Action. Center for Global Development. Maya Forstater. February 8, 2018.

 This paper looks at estimates of the potential gains from taxing across borders, alongside largely domestic measures such as property tax, personal income tax, VAT, and tobacco taxes. It finds that while action on cross-border taxation could yield additional tax take in the region of one percent of GDP, in many countries measures targeting the domestic tax base might deliver something in the region of nine percent. The main enabler is political commitment. [Note: contains copyrighted material].

 [PDF format, 51 pages].

Despite Growing Gender Equality, More Women Stay at Home Than Men

Despite Growing Gender Equality, More Women Stay at Home Than Men. YaleGlobal. Joseph Chamie. January 25, 2018

 Women have made great strides in education, employment, politics and equality in general worldwide, but participation in the labor force remains stubbornly below those of men. “By and large, a substantial proportion of mothers withdraw from employment after childbirth,” explains demography expert Joseph Chamie. Choices vary for men and women about working full or part time, placing children or elders in care, or staying at home for family duties. In India for 2016, 29 percent of women with young children joined the workforce versus 81 percent of men, and in Sweden, 80 percent of women are in the workforce versus 84 percent of men. Low participation rates contribute to a gender gap in wages, and higher participation rates contribute to economic growth and reduce poverty. Individuals and families make many calculations in balancing work and family responsibilities. Chamie notes that “families with two incomes are better prepared for unemployment, higher education, martial disruption, illness or economic downturns.” [Note: contains copyrighted material].

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Moving Beyond “Root Causes:” The Complicated Relationship between Development and Migration

Moving Beyond “Root Causes:” The Complicated Relationship between Development and Migration. Migration Policy Institute. Susan Fratzke and Brian Salant. January 2018.

 As policymakers in Europe and other high-income countries search for ways to reduce unmanaged migration, they are paying new attention to addressing the drivers of migration, in particular the lack of economic opportunities in countries of origin.

The logic, embedded in the European Commission’s 2015 European Agenda on Migration for example, suggests that if development assistance can improve livelihood prospects in countries of migrant origin, outward migration will decrease.

However, the nature of migrant decision-making and the complex relationship between migration and development suggest development assistance may be a blunt tool for reshaping migration patterns—and indeed one that could increase migration flows over the short term. Numerous studies have found that as countries become richer and their citizens have more resources at their disposal, emigration increases, at least initially. And while employment may decrease the likelihood that an individual will migrate in some contexts, in others it appears to increase those prospects.

Little solid research has been done on the extent to which development policies reshape migration, but the brief suggests shifting the focus of development assistance away from increasing individuals’ skills and assets toward the creation of opportunities at the local, regional, or national level. Investments in the broader economic or governance structures that are a prerequisite for economic growth and stability may offer more alternatives to emigration in the long run. In the shorter term, destination-country policymakers may need to accept the idea of working with, rather than against, migration trends to reap the development benefits of migration. [Note: contains copyrighted material].

 [PDF format, 19 pages, 797.53 KB].


Testing the Value of the Postwar International Order

Testing the Value of the Postwar International Order. RAND Corporation.   Michael J. Mazarr, Ashley L. Rhoades. January 8, 2018.

 Since 1945, the United States has pursued its interests through the creation and maintenance of international economic institutions, global organizations including the United Nations and G-7, bilateral and regional security organizations including alliances, and liberal political norms that collectively are often referred to as the “international order.” In recent years, rising powers have begun to challenge aspects of this order. The purpose of this report is very specific: to evaluate the order’s value — to assess its role in promoting U.S. goals and interests, and to measure its possible economic benefits in a number of specific areas. To answer the question of the order’s value, we first had to define the components of the order that we proposed to evaluate for possible value to U.S. interests. We then reviewed broad assessments of the order, as well as detailed empirical work on its specific components. The resulting analysis produced five major findings: the postwar order offers significant value to U.S. interests and objectives; specifically in quantifiable and return-on-investment terms, the order contributes to outcomes with measurable value and appears to have a strongly positive cost-benefit calculus; the postwar order represents a leading U.S. competitive advantage; if the United States wants to continue to lead globally, some form of order is vital; and a functioning multilateral order will be essential to deal with emerging security and economic issues. [Note: contains copyrighted material].

 [PDF format, 124 pages, 1.09 MB].

Roots of Prosperity: The Economics and Finance of Restoring Land

Roots of Prosperity: The Economics and Finance of Restoring Land.  World Resources Institute.  Helen Ding et al. December 2017

 This report provides a comprehensive analysis of the benefits and costs of restoring forests and landscapes in countries around the world, demonstrating how smart policies and innovative financing can help governments meet their restoration targets. The authors find that finance, both public and private, for restoration is inadequate for seven reasons, and offers solutions to these financial barriers.

The publication also outlines the main steps involved in carrying out economic analyses, bringing to light the full value of ecosystem services and social benefits as well as the costs of degradation. These insights can help governments to develop policy instruments and financing mechanisms that promote restoration on the ground. They can also help stakeholders incorporate environmental and social benefits into financing decisions. [Note: contains copyrighted material].

 [PDF format, 80 pages, 3.2 MB].