Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share

David Autor and Anna Salomons

No 24871, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many technological innovations replace workers with machines, but this capital-labor substitution need not reduce aggregate labor demand because it simultaneously induces four countervailing responses: own-industry output effects; cross-industry input–output effects; between-industry shifts; and final demand effects. We quantify these channels using four decades of harmonized cross-country and industry data, where we measure automation as industry-level movements in total factor productivity (TFP) that are common across countries. We find that automation displaces employment and reduces labor's share of value-added in the industries in which it originates (a direct effect). In the case of employment, these own-industry losses are reversed by indirect gains in customer industries and induced increases in aggregate demand. By contrast, own-industry labor share losses are not recouped elsewhere. Our framework can account for a substantial fraction of the reallocation of employment across industries and the aggregate fall in the labor share over the last three decades. It does not, however, explain why the labor share fell more rapidly during the 2000s

JEL-codes: D33 J23 O33 O57 (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-lma, nep-ltv, nep-pay and nep-tid
Note: EFG LS
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Citations: View citations in EconPapers (245)

Published as David Autor & Anna Salomons, 2018. "Is Automation Labor Share-Displacing? Productivity Growth, Employment, and the Labor Share," Brookings Papers on Economic Activity, vol 2018(1), pages 1-87.

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