Labor Supply and Automation Innovation

68 Pages Posted: 8 Jul 2020

See all articles by Alexander Danzer

Alexander Danzer

Catholic University of Eichstaett-Ingolstadt

Carsten Feuerbaum

KU Eichstaett-Ingolstadt

Fabian Gaessler

Max Planck Institute for Innovation and Competition

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Date Written: June 29, 2020

Abstract

While economic theory suggests substitutability between labor and capital, little evidence exists regarding the causal effect of labor supply on inventing labor-saving technologies. We analyze the impact of exogenous changes in regional labor supply on automation innovation by exploiting an immigrant placement policy in Germany during the 1990s and 2000s. Difference-in-differences estimates indicate that one additional worker per 1,000 manual and unskilled workers reduces automation innovation by 0.05 patents. The effect is most pronounced two years after immigration and confined to industries containing many low-skilled workers. Labor market tightness and external demand are plausible mechanisms for the labor-innovation nexus.

Keywords: Labor supply, automation, innovation, patents, labor market tightness, quasi-experiment

JEL Classification: O31, O33, J61

Suggested Citation

Danzer, Alexander and Feuerbaum, Carsten and Gaessler, Fabian, Labor Supply and Automation Innovation (June 29, 2020). Max Planck Institute for Innovation & Competition Research Paper No. 20-09, Available at SSRN: https://ssrn.com/abstract=3642594 or http://dx.doi.org/10.2139/ssrn.3642594

Alexander Danzer

Catholic University of Eichstaett-Ingolstadt ( email )

Auf der Schanz 49
Ingolstadt, D-85049
Germany

Carsten Feuerbaum

KU Eichstaett-Ingolstadt ( email )

Ingolstadt, 85049
Germany

Fabian Gaessler (Contact Author)

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, 80539
Germany

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