The Routine Biased Technical Change hypothesis : a critical review

In this report we contribute to the growing debate about how the introduction of technology affects labour demand. First, we provide some background of the main theoretical frameworks (SBTC and RBTC) used by researchers to explain recent changes in the employment distribution. Second, we review the most important empirical studies using the RBTC model. Overall, the prevailing economic literature provides empirical support to the RBTC model: cheaper computerisation progressively replaces human labour in routine tasks, thereby leading to an increase in the relative demand for workers performing non-routine tasks. Third, we show that the RBTC captures quite well the changes in the employment distribution, but we argue that it presents challenges from a conceptual, operational, and empirical point of view. These challenges are discussed in the report. Finally, we argue that the literature has yet to converge to a model that consistently explains how technology affects the labour demand. The RBTC has the merit of providing an explanation of why cheaper computerisation progressively replaces human labour in routine tasks, leading to an increase in the relative demand for workers performing nonroutine tasks. However, it is not immune to severe challenges, especially on the empirical ground. Future research should focus on the development of a measurement framework that addresses the challenges raised in this report.