Essays on Technology and Work

This thesis consists of four papers on technology, work, skills, and personality using novel large-scale data and methods. The first paper (Chapter 1, with Johannes Hirvonen and Aapo Stenhammar) presents novel evidence on the effects of advanced technologies on employment, skill demand, and firm performance. The main finding is that advanced technologies led to increases in employment and no change in skill composition. Our main research design focuses on a technology subsidy program in Finland that induced sharp increases in technology investment in manufacturing firms. Our data directly measure multiple technologies and skills and track firms and workers over time. We demonstrate novel text analysis and machine learning methods to perform matching and to measure specific technological changes. To understand our findings, we outline a theoretical framework that contrasts two types of technological change: process versus product. We document that the firms used new technologies to produce new types of output rather than replace workers with technologies within the same type of production. The results contrast with the ideas that technologies necessarily replace workers or are skill biased. The second paper (Chapter 2, with Ramin Izadi) investigates which personality traits and skills help workers to deal with a changing environment. Labor markets are in constant change. This paper documents how responses to labor-market shocks vary by individuals’ psychological traits. We construct measures of cognitive ability, extraversion, and conscientiousness using standardized personality and cognitive tests administered during military service to 79% of Finnish men born 1962–1979. We analyze establishment closures and mass layoffs between 1995–2010 and document heterogeneous responses to the shock. Extraversion is the strongest predictor of adaptation: the negative effect of a mass layoff on earnings is 20% smaller for those with one standard deviation higher scores of extraversion. Conscientiousness appears to have no differential impact conditional on other traits. Cognitive ability and education predict a significantly smaller initial drop in earnings but have no long-term advantage. Our findings appear to be driven directly by smaller dis-employment effects: extraverted and high cognitive-ability individuals find re-employment faster in a similar occupation and industry they worked in before. Extraversion’s adaptive value is robust to controlling for pre-shock education, occupation, and industry, which rules out selection into different careers as the driving mechanism. Extraverts are slightly more likely to retain employment in their current establishment during a mass layoff event, but the retention effect is not large enough to explain the smaller earnings drop. The third paper (Chapter 3, with Ramin Izadi) explores how different dimensions of personality predict school vs. labor-market performance, and how the value of these traits changed over time. We answer these questions using data that includes multidimensional personality and cognitive test scores from mandatory military conscription for approximately 80% of Finnish men. We document that some dimensions of noncognitive skills are productive at school, and some dimensions are counterproductive at school but still valued in the labor market. Action-oriented traits (activity, sociability, and masculinity) predict low school performance but high labor market performance. School-oriented traits, such as dutifulness, deliberation, and achievement striving, predict high school performance but are not independently valued in the labor market after controlling for school achievement. We further document that the labor-market premium to action-oriented personality traits has rapidly increased over the past two decades. To interpret the empirical results, we outline a model of multidimensional skill specialization. The model and evidence highlight two paths to labor-market success: one through school-oriented traits and formal skills, and one through action-oriented traits and informal skills. The fourth paper (Chapter 4) analyzes the impact of manufacturing decline on children. To do so, it considers local employment structure—characterizing lost manufacturing jobs and left-behind places—high-school dropout rates, and college access in the US over 1990–2010. To establish a basis for causal inference, the paper uses variations in trade exposure from China, following its entry to the WTO, as an instrument for manufacturing decline in the US. While the literature on job loss has emphasized negative effects on children, the main conclusion of this research is that the rapid US manufacturing decline decreased high-school dropout rates and possibly increased college access. The magnitudes of the estimates suggest that for every 3-percentage-point decline in manufacturing as a share of total employment, the high-school dropout rate declined by 1 percentage point. The effects are largest in the areas with high racial and socioeconomic segregation and in those with larger African American populations. The results are consistent with the idea that the manufacturing decline increased returns and decreased opportunity costs of education, and with sociological accounts linking the working-class environment and children’s education