The Macroeconomics of Automation

Gadi Barlevy (), Erik Hurst () and Oleg Itskhoki
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Gadi Barlevy: University of Chicago
Erik Hurst: University of Chicago
Oleg Itskhoki: University of California, Los Angeles

No 2026-41, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: This paper studies the macroeconomic implications of automation and the adoption of labor-saving technologies. We develop a model in which firms endogenously choose between labor and automation, subject to adjustment costs and productivity shocks. The model highlights how automation affects aggregate productivity, labor demand, and wage inequality. We show that while automation can increase overall output, it may also lead to transitional declines in employment and shifts in the distribution of income. Quantitative results suggest that policy responses depend critically on the speed of technological adoption and labor market frictions.

Keywords: Automation; technological change; labor demand; productivity; wage inequality (search for similar items in EconPapers)
JEL-codes: E24 J23 O33 O41 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2026
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