Monopsony and Automation

34 Pages Posted: 16 Oct 2023

See all articles by José Azar

José Azar

University of Navarra, IESE Business School; CEPR; ECGI

Marina Chugunova

Max Planck Institute for Innovation and Competition

Klaus Keller

Max Planck Institute for Innovation and Competition

Sampsa Samila

University of Navarra, IESE Business School

Date Written: October 11, 2023

Abstract

We examine the impact of labor market power on firms’ adoption of automation technologies. We develop a model that incorporates labor market power into the task-based theory of automation. We show that, due to higher marginal cost of labor, monopsonistic firms have stronger incentives to automate than wage-taking firms, which could amplify or mitigate the negative employment effects of automation. Using data from US commuting zones, our results show that commuting zones that are more exposed to industrial robots exhibit considerably larger reductions in both employment and wages when their labor markets demonstrate higher levels of concentration.

Keywords: automation, employment, labor market concentration, industrial robots, wage setting

JEL Classification: J23, J30, J42, L11, O33

Suggested Citation

Azar, José and Chugunova, Marina and Keller, Klaus and Samila, Sampsa, Monopsony and Automation (October 11, 2023). Max Planck Institute for Innovation & Competition Research Paper No. 23-21, Available at SSRN: https://ssrn.com/abstract=4599704 or http://dx.doi.org/10.2139/ssrn.4599704

José Azar

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

CEPR ( email )

London
United Kingdom

HOME PAGE: http://https://sites.google.com/site/joseazar/

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Marina Chugunova (Contact Author)

Max Planck Institute for Innovation and Competition ( email )

Munich, 80539
Germany

Klaus Keller

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

Sampsa Samila

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

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