The Distribution of Automation Rents with Centralized Bargaining

Pietro Reichlin

No 22046, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: When technical progress arises from the decreasing cost of machines performing tasks that are highly substitutable with some type of labor, perfect competition may exacerbate wage inequality and concentrate the benefits of economic growth on the workers who are performing less routine tasks. I study how centralized efficient bargaining reallocates automation-generated surplus across technologically heterogeneous worker groups (performing "routine" and "non-routine" tasks) and show that this redistribution can reverse the sign of the relationship between routine workers' productivity and their wage, although this may entail efficiency costs in terms of some unemployment for routine workers and excess investment in automation. I provide conditions for which the efficient bargaining wages are increasing in automation efficiency and show that routine labor employment may increase as automation gets cheaper and the efficiency cost of centralized bargaining gets very small when automation and routine labor are highly substitutable.

Keywords: Automation; Wage inequality; Wage bargaining (search for similar items in EconPapers)
JEL-codes: J2 J3 J41 J51 O11 O43 (search for similar items in EconPapers)
Date: 2026-10
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