What are the Labor and Product Market Effects of Automation? New Evidence from France

50 Pages Posted: 3 Mar 2020

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Celine Antonin

Institut d'Etudes Politiques de Paris (Sciences Po)

Simon Bunel

Banque de France

Xavier Jaravel

London School of Economics & Political Science (LSE) - Department of Economics

Date Written: February 2020

Abstract

We use comprehensive micro data in the French manufacturing sector between 1994 and 2015 to document the effects of automation technologies on employment, wages, prices and profits. Causal effects are estimated with event studies and a shift-share IV design leveraging predetermined supply linkages and productivity shocks across foreign suppliers of industrial equipment. At all levels of analysis - plant, firm, and industry - the estimated impact of automation on employment is positive, even for unskilled industrial workers. We also find that automation leads to higher profits, lower consumer prices, and higher sales. The estimated elasticity of employment to automation is 0.28, compared with elasticities of 0.78 for profits, -0.05 for prices, and 0.37 for sales. Consistent with the importance of business-stealing across countries, the industry-level employment response to automation is positive and significant only in industries that face international competition. These estimates can be accounted for in a simple monopolistic competition model: firms that automate more increase their profits but pass through some of the productivity gains to consumers, inducing higher scale and higher employment. The results indicate that automation can increase labor demand and can generate productivity gains that are broadly shared across workers, consumers and firm owners. In a globalized world, attempts to curb domestic automation in order to protect domestic employment may be self-defeating due to foreign competition.

Suggested Citation

Aghion, Philippe and Antonin, Celine and Bunel, Simon and Jaravel, Xavier, What are the Labor and Product Market Effects of Automation? New Evidence from France (February 2020). CEPR Discussion Paper No. DP14443, Available at SSRN: https://ssrn.com/abstract=3547376

Philippe Aghion (Contact Author)

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Celine Antonin

Institut d'Etudes Politiques de Paris (Sciences Po) ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France

Simon Bunel

Banque de France ( email )

31 rue Croix des Petits Champs
Paris, 75001
France

Xavier Jaravel

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom
7456842728 (Phone)
NW12AR (Fax)

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