title: Labour markets, technological change, and natural disasters
Creators: name: Campos Gonzalez, Jorge Abner
Publisher: name: University of Reading
Year: 2022

description: This thesis examines the interactions between labour markets, technological change, and natural disasters in Chile, which has been considered as one of most successful Latin American countries according to economic growth and structural economic reforms over the last decades. One of these major reforms was trade liberalization implying an important absorption of foreign technologies biased towards skilled labour which increased from 10.1 per cent in 1980 to 30.4 per cent in 2018. At the same time, the Chilean higher education experienced substantial growth between the 1980s and 2010s, showing that people enrolled in tertiary education sextupled. In 1984, 11% of the 18 – 24 enrolled in tertiary education while in in 2018, it was 67%. In this regard, Chile supplies an environment particularly well suited to study the technological change driving the skill premium evolution. in Chile, like most Latin American countries, the skill premium is suggested as the main force driving the observed rise and fall of income inequality in recent decades (Acosta et al., 2019; Guerra-Salas, 2018; Parro &amp; Reyes, 2017). The decline in income inequality is an important step in improving the population’s assessment of their well-being. Furthermore, Chile supplies a unique location for studying the potential for technological upgrading in the aftermath of catastrophes since it is characterized by recurring severe earthquakes. Earthquakes supply the opportunity to analyse technological upgrading due to their unexpected occurrence and destructive ability. Therefore, examining the interactions between technology, labour markets and natural disasters has important implications for our understanding of the interrelations between these economic forces. The thesis is divided into three essays. The first essay aims to test the Race between Education and Technology, RBET, model empirically for Chile using recurrent bi-annual labour survey data from 1980 to 2018. The main aspects that motivate this research are the lack of evidence in the post-2000 period and "estimation difficulties" reported by past studies. These difficulties imply mainly the computation of positive coefficients standing for the expected negative relationship between the skill premium, i.e., the gap between skilled and unskilled wages, and the relative supply of skilled labour as posited by the RBET theory. Besides, a positive coefficient would imply the computation of a negative elasticity of substitution between skilled and unskilled labour. We also find "estimation difficulties" using cointegration techniques. Alternatively, we apply an Unobserved Component Model, UCM, estimated by Bayesian inference, UCM-Bayesian, whose results are more consistent with the RBET model. We find that both demand and supply factors explain the evolution of the skill premium. In the context of the race between technology and education, in the pre-2000 period, the relative demand attributable to skill-biased technological change, SBTC, with its rapid acceleration contributing to a high skill premium, is suggested as the dominant factor. However, in the post-2000 span, the demand factor was surpassed by strong increases in the relative supply, suggesting education as the dominant factor inducing a declining trend in the skill premium. Furthermore, our estimate for the elasticity of substitution is 6.5. The value iv greater than one implies that skilled and unskilled workers are imperfect substitutes but more substitutable than commonly thought, given the past estimates for this parameter. The second essay evaluates the influence on the skill premium for the task-content of jobs and specific workers' abilities. We exploit the text data from job posting ads covering 2009-2018 (approx. 189,000 ads) to capture demand for tasks and skills. Our task-related analysis tests the expected complementarity between skilled labour and non-routine cognitive (analytical and interactive) and routine cognitive tasks. In our skills-related analysis, we evaluate whether cognitive and social abilities influence the skill premium. Our results show weak evidence for non-routine cognitive tasks as drivers of the skill premium progress, while routine cognitive tasks do not explain this wages differential. Also, we do not find evidence that cognitive or social abilities, separately or in combination, explain the evolution of the skill premium. The apparently inferior importance of cognitive tasks and abilities might imply an inefficient educational investment or unwanted changes in the occupational ladder for higher educated workers. The potential impact natural disasters have in improving demand for labour in the Information and Communication Technologies, ICT, sector is explored in the third essay. We explore whether disasters can accelerate the current technical progress featured by ICT, assuming that updated and ICT compatible equipment replaces the destroyed equipment. In turn, this faster rate of technological adoption would lead to increases in demand for ICT labour. We use a severe earthquake (8.8 Mw) that struck Chile's Central Region on February 27, 2010, as a natural experiment and a subsample from online job posting data used in the second essay. We implement a structural topic model, STM, to estimate the difference in the prevalence of topics related to ICT labour (as proxies for upgrading new technologies) and the Construction sector labour by comparing two years before to two years after the earthquake. Our results show that the prevalence of the ICT labour topic does not substantially change, suggesting that there was no technological replacement following the earthquake. In contrast, the prevalence of the Construction labour topic was significantly different after the disaster, suggesting that reconstruction activities lead to employment differences in the Construction sector.