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

David Autor, Anna Salomons

NBER Working Paper No. 24871
Issued in July 2018, Revised in August 2018
NBER Program(s):The Economic Fluctuations and Growth Program, The Labor Studies Program

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

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Document Object Identifier (DOI): 10.3386/w24871

Published: 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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