COVID-19 and automation in a developing economy: Evidence from Chile

This paper analyzes the Covid-19 pandemic impact of the global process of automation on employment in a developing economy. This is particularly interesting because developing economies characteristics, such as having larger informal sectors and weaker social safety nets, shapes the impact of automation on labor markets. We show that occupations with a higher risk of automation exhibit the most significant employment contraction. More specifically, we find that one standard deviation higher in sectoral share of employment in occupations at risk of automation (OaRA) implied around 7% less employment on average between the last quarter of 2019 and the first quarter of 2021. The effect on informal employees is three times more in comparison to formal employees, and the estimation for self-employed workers is not statistically significant. We also find that employees in sector with relatively low compared to high wages, both vis-a-vis the US, exhibit a 20% smaller reaction on employment due to the pandemic restrictions. We do not find robust evidence showing that the employment contraction has been larger among female workers or in jobs with higher at-work physical proximity, but we do find a positive relationship related to the capacity of working remotely.