The Impact of Digital Technologies on Routine Tasks: Do Labor Policies Matter?

There is a strong concern that technology is increasingly replacing routine tasks, displacing lower-skilled workers. We assess the link between access to digital technologies and the demand for skills in Brazil. Between 1996... [ view full abstract ]

There is a strong concern that technology is increasingly replacing routine tasks, displacing lower-skilled workers. We assess the link between access to digital technologies and the demand for skills in Brazil. Between 1996 and 2006, the country experienced a period of strong growth in internet service provision, as well as in the enforcement of labor market regulations at the subnational level. Our empirical strategy exploits administrative data to assess the extent to which the adoption of digital technology affects employment and the skill content of jobs at the local level. In addition, we investigate whether the stringency of labor regulations influences this adjustment, by comparing the effect across industries subject to different degrees of enforcement of labor regulations. Using the fact that industries vary in the degree of reliance on digital technologies, our estimates suggest that digital technology adoption leads to a reduction in employment in local labor markets. The decrease in employment is larger for routine tasks, thereby shifting the composition of the workforce toward non-routine, cognitive skills. However, and in contrast with labor policy intentions, our evidence points to the idea that labor market regulations differentially benefit the skilled workforce, particularly those workers employed in non-routine, cognitive tasks.