WEFI

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WEFI

Title: “Labor and Product Market Effects of Automation”

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.

Presenter: Xavier Javarel (The London School of Economics and Political Science)

Coauthors: Philippe Aghion (College de France and London School of Economics and Political Science, Fellow; CEPR; NBER), Celine Antonin (Sciences Po), and Simon Bunel (Banque de France)

Discussant: Anders Humlum (University of Chicago) and Ajay Agrawal (University of Toronto)

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