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Title page 1

Contents 1

Abstract 3

1. Introduction 4

2. The Model of Labour Supply 8

2.1. Environment and Occupational Choice 8

2.2. Price Elasticities of Occupational Employment 9

2.3. Generalisations 14

3. Labour Demand and Equilibrium 15

4. Data and Descriptives 19

4.1. Main Data Sources and Historical Sample 19

4.2. Estimated Elasticities and Spillovers 20

5. Estimation in the Historical Sample 24

5.1. Occupational Changes over 1985-2010 24

5.2. Identification of the Labour Supply Parameter θ 28

6. Model-Based Decomposition and Counterfactuals 32

6.1. Construction of Counterfactuals 32

6.2. Results 33

7. Future Projections 37

8. Conclusion 41

References 43

Appendix 49

A. Formal Results on the Elasticity Matrix 51

A.1. Derivation of Remark 1 (Elasticities and Job Flows) 51

A.2. Discussion of Remark 2 (Occupational Substitutabilities) 52

A.3. Remark 5: Vector of Price Changes 55

B. Generalisations of the Labour Supply Model 57

B.1. Overlapping Generations Model 57

B.2. Aggregation of Subgroups 66

B.3. Accounting for Non-Employment Transitions 70

C. Labour Demand and Equilibrium 72

C.1. Baseline Competitive Model 72

C.2. Alternative: Equilibrium with Monopsonistic Employers 77

D. Data Appendix 80

D.1. The SIAB Data 80

D.2. Data on Tasks and Occupational Characteristics 84

E. Further Analysis in the Historical Period 86

E.1. Descriptive Statistics in the Historical Sample 86

E.2. Occupational Changes over 1985-2010 97

E.3. Identification of the Labour Supply Parameter θ 98

F. Model-Based Decomposition and Counterfactuals 103

F.1. Backing Out the Shocks 103

F.2. Counterfactual Elasticities 104

F.3. Further Results on Decomposition and Counterfactuals 105

G. Robustness: Supplementary Material 109

G.1. Analysis in Five-Year Sub-Periods 109

G.2. Alternative Occupational Price Estimation 110

H. Further Analysis on the Future Projections 115

H.1. Descriptive Statistics in the Prediction Sample 115

H.2. Employment Flows between Occupations 116

Tables 22

Table 1. Summary Statistics: Own- and Cross-Price Elasticities 22

Table 2. Determinants of Employment Changes: Own- and Cross-Effects (OLS) 27

Table 3. Decomposition of Overall Employment Changes 34

Figures 23

Figure 1. Elasticity Components: Comparison with External Metrics 23

Figure 2. Occupational Price and Employment Changes (1985-2010) 25

Figure 3. Instrumental Variables Illustration: Median-Split by Own-Price Elasticity 30

Figure 4. Counterfactual Changes of Prices and Employment 35

Figure 5. Price and Employment Changes due to Predicted Automation Shocks 38

Figure 6. Projected Net In and Out Flows of the Occupation IT Consulting & Sales 40

Appendix Tables 54

Table A.1. Median Values of Model Components Across Occupation Pairs 54

Table B.1. Accounting for Unemployment Transitions. Determinants of Employment Changes: Own- and Cross-Effects (OLS-IV) 71

Table E.1. Summary Statistics for the 120 Occupations 89

Table E.2. Summary Statistics. Annualised Employment and Occupational Price Changes by Sub-Periods 90

Table E.3. Summary Statistics. Elasticity Matrix and Transition Probability Matrix 91

Table E.4. Summary Statistics: Elasticity Components 92

Table E.5. All 120 Occupations Ranked by Diagonal Elements djj, and their Employment Size 94

Table E.6. Determinants of Employment Changes: Own- and Cross-Effects (OLS) 98

Table E.7. Robustness to Different Values of θ/σ 99

Table E.8. Results for AlternativeWay of Estimating θ 102

Table G.1. Full Model Pooled Sub-Periods (OLS-IV) 111

Table G.2. Occupational Prices à la Cortes (2016) and Changes in Employment. Main Results 114

Table H.1. Summary Statistics for the 126 Occupations 116

Table H.2. Predicted Wage Change and Price Pressures from Five Nearest Occupations 117

Appendix Figures 69

Figure B.1. Elasticities by Age Groups 69

Figure B.2. Elasticities by Education Groups 70

Figure E.1. Own-Price and Cross-Price Elasticity: Comparison with External Metrics 93

Figure E.2. Occupational Price and Employment Changes by Own-Price Elasticity djj Quartiles 97

Figure E.3. IV Reduced-Form for Employment 100

Figure F.1. Counterfactual Changes of Prices and Employment (II) 107

Figure F.2. Distribution of Demand and Supply Shocks by Occupation 107

Figure F.3. Contribution of Demand and Supply Shocks (Full Model) 108

Figure F.4. Contribution of Demand and Supply Shocks (Fully Homogeneous Model) 108

Figure G.1. Occupational Price and Employment Changes (by Own-Price Elasticity Median Split) 112

Figure G.2. Occupational Prices à la Cortes (2016) and Employment 113

Figure H.1. Projected Net In and Out Flows by Top Senders and Receivers 119