Re-examining the automation-employment nexus from a classical political economy approach

Abstract

Based on the general law of capitalist accumulation and its theoretical mechanisms, this paper aims to examine the relationship between automation and employment across several sectors in 42 countries from 2000 to 2014. Using data from the World Input-Output Database (WIOD), vertically integrated labour productivity and vertically integrated capital-output ratio are computed as indices to measure the impact of technological change and mechanisation on sectoral employment dynamics. To address potential endogeneity, cross-sectional dependence, and slope heterogeneity in data, the dynamic panel Generalised Method of Moments (GMM) combined with the Common Correlated Effect (CCE) is applied. The sample is divided into advanced and emerging economies to identify disparities related to the developmental degree of the countries under investigation, while industries are distinguished to determine which are more vulnerable to automation. The empirical findings support the hypothesis of labour-saving technological progress and mechanisation, consistent with classical political economy and Marxian theories.