Technologies and Labour : A Theoretical Model of Task-based Production in Labour Market with Search Frictions

This paper explores the effects of automation and the creation of new tasks on labour market outcomes by incorporating the task-based production of Acemoglu and Restrepo (2018a) into a modified Diamond-Mortensen-Pissarides (DMP) search and matching framework. While the effect on wages aligns with existing literature, the introduction of search frictions offers new insights regarding effects on unemployment. Automation is found to have a dual impact: it displaces workers from routine tasks but simultaneously generates productivity gains which can offset its negative effects. The net impact on unemployment and wages depends on the relative magnitude of these displacement and productivity effects which are analytically derived in the research. In contrast, the creation of new tasks has a more uniformly positive impact, as it both enhances the productivity and reinstates displaced workers, leading to lower unemployment and higher wages. The findings suggest that policies should ensure not to promote excessive automation, where it negatively affect the labour market. In contrast, fostering innovation and task creation can be effective ways to benefiting from technological advancements.