The Effects of Automation on Labor Demand: A Survey of the Recent Literature

30 Pages Posted: 4 Feb 2022

See all articles by Philippe Aghion

Philippe Aghion

Université Paris VI Pierre et Marie Curie - College de France; Centre for Economic Policy Research (CEPR)

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: January 1, 2022

Abstract

In this article, we survey the recent literature and discuss two contrasting views on the impacts of automation on labor demand. A first view predicts that firms that automate reduce employment, even if this may ultimately result in job creations taking advantage of the lower equilibrium wage induced by job destructions. A second approach emphasizes the market size and business stealing effects of automation. Automating firms become more productive, which enables them to lower their quality-adjusted prices, and therefore to increase the demand for their products. The resulting increase in scale translates into higher employment by automating firms, potentially at the expense of their competitors through business stealing. Drawing from our empirical work on French firm-level data and a growing literature covering multiple countries, we provide empirical support for this second view: automation has a positive effect on labor demand at the firm level, which remains positive at the industry level as it is not fully offset by business stealing effects. We discuss the implications of these results for the taxation of automation technologies such as robots.

Suggested Citation

Aghion, Philippe and Antonin, Celine and Bunel, Simon and Jaravel, Xavier, The Effects of Automation on Labor Demand: A Survey of the Recent Literature (January 1, 2022). CEPR Discussion Paper No. DP16868, Available at SSRN: https://ssrn.com/abstract=4026751

Philippe Aghion (Contact Author)

Université Paris VI Pierre et Marie Curie - College de France ( email )

11 Place Marcellin Berthelot
Paris, 75005
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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 )

Paris
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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