Do Robots Increase Wealth Dispersion?

Abstract

We document significant negative effects of exposure to increased automation at work on household wealth accumulation. Beyond the income and savings channels, we uncover a novel mechanism contributing to the negative wealth effects of automation that arises through the endogenous optimal portfolio decisions of households. We show that households rebalance their financial wealth away from the stock market in response to increased human capital risk induced by pervasive automation, thereby attaining lower wealth levels and relative positions in the wealth distribution. Our evidence suggests that the portfolio channel amplifies the inequality-enhancing effects of increased automation.

Keywords: Portfolio choice, household wealth accumulation, robots, automation, labor income uncertainty.

JEL Classification: D31, J24, E21, D1, G11