Do Robots Increase Wealth Dispersion?
91 Pages Posted: 22 Aug 2018 Last revised: 6 Feb 2022
Date Written: August 13, 2018
We document significant negative effects of exposure to increased automation at work on household wealth accumulation. Beyond the income and saving channels, we uncover a novel mechanism driving the negative wealth effects of automation that arises through the endogenous optimal portfolio decisions of households. We show both theoretically and empirically 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
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