# **2. Literature Review**

Our paper is related to three different strands of literature. <mark>First, we relate to studies analyzing changes in the demand for skills and employment due to ICT adoption. The available evidence is mainly focused on developed countries. These studies show that computers substitute for workers carrying out routine tasks, but complement workers carrying out activities difficult to automate, such as non-routine analytical and interpersonal tasks. A pattern of employment polarization emerges as a consequence of computerization, where low- and high-skilled occupations gain share in total employment at the expense of middle-skilled occupations. These studies include Acemoglu (1999), Autor et al. (2003), Acemoglu and Autor (2011), A</mark> utor and Dorn (2013) and Autor (2014) for the U.S., <mark>Goos and Manning (2007) for</mark> the United Kingdom, and <mark>Goos et al. (2014) and Michaels et al. (2014) for European countries more broadly.</mark> <mark>The evidence for developing countries is scarcer. Among the studies using household and labor force surveys or administrative data in developing countries, there is evidence that occupations using ICT more intensively have a high demand for cognitive skills and a low demand for routine and non-routine manual skills (Santos et al., 2015). Poole et al. (2017) find that technological change, as measured by the share of households connected to the internet, does not appear to be a main driver of the demand for skills in Vietnam. In a similar study, Poole and Santos-Paulino (2017) show that the adoption of computers by households in Vietnam is strongly associated with increases in the demand for non-routine manual tasks and routine cognitive tasks. Based on employer-employee data from Brazil, Almeida et al. (2017a) find that the rollout of the internet between 1996 and 2006 was associated with a reduction in employment and a fall in demand by technology-intensive industries for routine tasks, thus shifting the composition of employment towards non-routine tasks. Finally, Almeida et al. (2019) find that the use of advanced software reduces</mark> the relative demand for analytical skills by Chilean firms. This indicates that the impact of technology on the demand for different types of skills depends on the technology considered. Their finding is relevant for our study, where the share of households with a computer is used as a proxy for the level of technological development accessible by firms. This proxy may be signaling the use of more advanced technologies by firms, which could have a different impact on the demand for skills than simply the adoption of computers.

Second, our paper is related to studies analyzing the impact of trade on employment and the demand for different types of skills. There is substantial evidence showing that increased exposure to international markets affects the level and occupational composition of employment. Autor et al. (2015) find that competition from Chinese goods significantly reduced employment in the United States, especially in manufacturing industries and among low-educated workers. Cortes et al. (2016) find that workers who lose their routine jobs in the United States due to import competition tend to move to non-routine manual jobs or non-employment. The offshoring of some production tasks, mainly routine tasks, can reduce employment. However, offshoring also enables firms to be more productive, increasing their output level and employment (Grossman and RossiHansberg, 2008). As a result, the final effect on employment is ambiguous. Ebenstein et al. (2014) show that offshoring from the United States to China did not have a negative impact on employment, but reduced labor force participation. For developing countries, Poole et al. (2017) provide evidence for Vietnam indicating that trade, measured by the value of exports, expands the 5