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"Gauging the Effects of Automation on a Labor Market Skill Continuum"

Abstract :
We set up a search and matching model that features two skill types of workers and includes automation capital as an additional production factor. In this model, automation capital is a perfect substitute for low-skilled workers and an imperfect substitute for high-skilled workers. Applying tis model onto French data, we observe that the accumulation of automation capital decreases the labor market tightness in the low-skilled labor market and increases the labor market tightness in the high-skilled labor market. We further extend this model to incorporate a continuum of skills on the low-skilled job market in order to endogenize automation quantity.