et al., 2006).<sup>3</sup> In contrast, this paper finds evidence of more persistent employment effects than might be driven by sticky prices. For most economies, investment does not fall in response to a technology shock. Investment, as well as employment, is expected to fall initially in standard New Keynesian models.

In some cases, the SVAR literature has assigned the fall in employment found in some advanced economies following an SVAR-identified technology shock to the displacement of labor for new technologies, rather than the sticky-price mechanism. Canova et al. (2013) and Michelacci and Lopez-Salido (2007) attribute falling employment after a technology shock to Schumpeterian ‘creative destruction’ effects. This paper builds on this tradition, using a significantly larger set of economies under consideration, and using new SVAR identification techniques. However, a range of alternative and complementary approaches have also been implemented to establish the effects of new technologies on employment.

# **2.2 Sectoral evidence**

A large body of evidence has shown that jobs have become increasingly polarized into low- and high-skill occupations in the U.S. and Europe in recent decades, as a combination of automation and offshoring has reduced demand for middle and low-skilled workers performing routine and codifiable jobs (Acemoglu, 1999; Autor, 2015; Goos et al., 2014). Many of these lost occupations were in the industrial sector, even as value-added produced by the sector remained resilient; in the United States, employment of machine operators, assemblers, and other production employees fell by over one-third every 10 years between 1980 and 2005 (Autor and Dorn, 2013). In a study of 16 European economies during 1993-2010, the share of employment accounted for by middle- and lowskilled industrial sector occupations fell by nearly 10 percentage points (Goos et al., 2014). In the United States and France, the increased use of robotics in industry is found to be inversely related to industrial employment levels since 1990 and 2010, respectively (Acemoglu et al., 2020; Acemoglu and Restrepo, 2020). Some service sector occupations are also found to have been negatively affected by this trend in both regions, notably middle-skilled jobs such as office clerks. However, codifiable middle- and low-skill jobs have been (at least partially) replaced by higher demand for both lowskill service sector jobs, which are less easy to automate, and higher-skill jobs that complement new technologies. SVAR analysis of sectoral manufacturing data for advanced economies has also found negative effects on total hours worked of developments that have driven persistent positive TFP growth (Chang and Hong, 2006; Park, 2012; Khan and Tsoukalas, 2013).

> 3A wide range of SVAR literature has tackled the response of labor inputs in response to technology to assess the presence of a sticky-price mechanism, including (to name just a few) Christiano et al. (2004), Dedola and Neri (2007), Collard and Dellas (2007), Francis and Ramey (2005), Francis et al. (2014), and Canova et al. (2010). The majority of research has found evidence of decreasing employment from technology shocks in the U.S. context.

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