Routine-Biased Technological Change and Endogenous Skill Investments

Abstract

We investigate how individuals alter their educational investments in response to routine-biased technology. We find that individuals growing up in robot-impacted areas are more likely to complete a bachelor’s degree and experience a relative increase in earnings. Changes in the skill premium and opportunity cost appear to drive these effects. To interpret these findings, we estimate a model of endogenous skill acquisition where changes in the demand and supply of skills shape the path of earnings. Counterfactual simulations suggest that the endogenous skill response cannot fully undo the adverse earnings effects of automation unless there are sufficiently generous educational subsidies. (JEL I26, J22, J23, J24, J31)