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

76 Pages Posted: 1 Aug 2018 Last revised: 17 Jun 2021

See all articles by David H. Autor

David H. Autor

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Anna Salomons

Utrecht University - School of Economics; KU Leuven - Center for Economic Studies

Date Written: July 2018

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

Suggested Citation

Autor, David H. and Salomons, Anna, Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share (July 2018). Available at SSRN: https://ssrn.com/abstract=3222438

David H. Autor (Contact Author)

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Anna Salomons

Utrecht University - School of Economics ( email )

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KU Leuven - Center for Economic Studies ( email )

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