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  5. The Future of Work in Latin America
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The Future of Work in Latin America

Paper Session

Sunday, Jan. 9, 2022 3:45 PM - 5:45 PM (EST)

Hosted By: Latin American and Caribbean Economic Association
  • Chair: Jeanne Lafortune, Pontifical Catholic University of Chile

The Future of Work in Developing Economies: What Can We Learn from the South?

Pablo Egaña del Sol
,
Adolfo Ibanez University
Alejandro Micco
,
University of Chile

Abstract

In recent years, there has been an escalation of concern revolving around the effect that automation will have on the future of work. This anxiety has fueled the public and academic debate, fearing that soon this technology will displace jobs at a large scale. Numerous studies have begun to investigate automation’s impact on labor markets, although all have focused on industrialized nations which consist of more service and skilled occupations. Utilizing the World Bank’s STEP Skills Measurement Program Database, we examine automation’s effect on 10 developing countries throughout Latin America, Africa, and Asia. To address the heterogeneity of occupations across the country, we apply a task-based approach and re-calibrate the effect of automation on labor market while analyzing the task structure across countries. Modelling off previous studies, we created an expectation-maximization algorithm to predict the percentage of tasks which are likely to be automated. Jobs whose task automation output was 70% or higher were then considered to be highly automatable. Our results suggest that these developing countries have higher levels of predicted automation risk. Countries range in their level of highly automatable jobs from the lowest being Yunnan – a Chinese province – with 7.7% to the highest of Ghana with 42.4%. We find that occupations containing relatively more routine tasks are more likely to be automated, while workers with a higher level of education reduce their risks. This is the first paper to estimate automation risk rates for developing nations.

Development and the Comparative Advantage of Services

Laura Alfaro
,
Harvard Business School
Marcela Eslava
,
University of Los Andes-Bogota

Abstract

Services dominate world’s production and employment. Their role in development, however, is relatively understudied. Using census-type microdata for several countries in Latin America, we study the characteristics and role of services in emerging economies, paying particular attention to productivity and input-output linkages. Services play a key intermediation role in the economy. We first characterize the firm and employment distribution of services subsectors, vis a vis manufacturing, in Latin America compared to developed economies. The detailed nature of the data allows a full-distribution characterization that has not been possible in previous cross-country comparisons of business size. While our data corroborate that average establishment size is much smaller in Latin America than Western Europe or the US, our analysis establishes four striking new facts. First, the correlation between establishment size and development is driven by the extreme prevalence of microenterprises in Latin America, rather than a left shift of the entire distribution, both in services and manufacturing. Second, the gap in the weight of microenterprises between emerging and developed economies is less severe in services than manufacturing. Third, the (detailed) size distribution in the wholesale and retail subsector exhibits a missing middle that has been ruled out in manufacturing while other services sectors behave like manufacturing in the sense that the excess mass in microenterprises is compensated by smaller contributions of middle and large size classes (rather than a missing middle). Four, there is wide heterogeneity across subsectors of services. The distribution of employment is most concentrated in microenterprises in wholesale, retail, restaurants and hotels. We also study how these facts relate to productivity and markups in services, and to its linkages to other firms and sectors through the input-output structure. We find that productivity is much more correlated with markups in services than in manufacturing, while markups are lower in services.

Labor Polarization in Latin America

Alexandre Janiak
,
Pontifical Catholic University of Chile
Jeanne Lafortune
,
Pontifical Catholic University of Chile
Jose Tessada
,
Pontifical Catholic University of Chile
Mario Jeldres
,
Pontifical Catholic University of Chile

Abstract

This paper replicates the methodology of Autor, Katz and Kearney (2008) for selected countries of Latin America where data required for such analysis is available. Our preliminary analysis suggests that labor market polarization has not occurred in Latin America as it has in North America. The explanation does not seem to stem from the fact that new technologies have not similarly affected occupations in the region as in wealthier countries. However, the occupations most affected by new technologies are not located, as in the United States, in the middle of the distribution but rather at its top, leading technological change to reduce inequality. Furthermore, labor market policies such as minimum wage, may have also significantly differently impacted wage evolution in both regions. This highlights that the same technological revolution may not affect workers of different regions in a similar way.

Discussant(s)
Federico Huneeus
,
Central Bank of Chile
Joseba Martinez
,
London Business School
William F. Maloney
,
World Bank
JEL Classifications
  • J2 - Demand and Supply of Labor
  • O1 - Economic Development