Induced Automation: Evidence from Firm-level Patent Data

University of Zurich, Department of Economics, Working Paper No. 384

80 Pages Posted: 28 Apr 2021

See all articles by Antoine Dechezleprêtre

Antoine Dechezleprêtre

London School of Economics & Political Science (LSE)

David Hémous

University of Zürich; Centre for Economic Policy Research (CEPR)

Morten Olsen

University of Copenhagen

Carlo Zanella

University of Zurich - Department of Economics

Date Written: April 2021

Abstract

Do higher wages lead to more automation innovation? To answer this question, we first use the frequency of certain keywords in patent text to create a new measure of automation innovation in machinery. We show that our measure is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of low- and high-skill wages. In a firm-level panel analysis, we find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 5. Placebo regressions show that the effect is specific to automation innovations. Finally, we focus on a specific labor market shock, the German Hartz reforms, and show that they reduced automation innovations by those non-German firms relatively more exposed to Germany.

Keywords: Automation, innovation, patents, income inequality

JEL Classification: O31, O33, J20

Suggested Citation

Dechezleprêtre, Antoine and Hemous, David and Olsen, Morten and Zanella, Carlo, Induced Automation: Evidence from Firm-level Patent Data (April 2021). University of Zurich, Department of Economics, Working Paper No. 384, Available at SSRN: https://ssrn.com/abstract=3835089 or http://dx.doi.org/10.2139/ssrn.3835089

Antoine Dechezleprêtre (Contact Author)

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

Houghton Street
London, WC2A 2AE
United Kingdom

David Hemous

University of Zürich ( email )

Zürich
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Morten Olsen

University of Copenhagen ( email )

Copenhagen
Copenhagen
Denmark

Carlo Zanella

University of Zurich - Department of Economics ( email )

Zürich
Switzerland

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