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External Seminar by Paul Telemo (University of Strathclyde)
This paper analyses intergenerational occupational mobility in the presence of routine-biased technological change (RBTC). During the era of job polarization, fathers in cognitive jobs became relatively more likely to have sons in cognitive jobs, while the rise in low–skilled manual jobs was mainly accounted for by children of routine workers. These facts, among others, are rationalized in an overlapping generations model where both financial resources and learning ability are transferred from parents to their children. Education choices are endogenous, and the cost of education depends on the cognitive wage — hence both parents’ income and the economy-wide cognitive wage premium affect the education decision. The model is calibrated to the US economy and successfully captures key empirical patterns. Despite depressing routine wages, altruistic preferences mean that routine workers born 1950-1965 experienced welfare gains due to RBTC. However, these gains would be larger if the pace of technological change was slowed down.