Explaining the labor share: automation vs labor market institutions

Luís Guimarães*, Pedro Mazeda Gil

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)
226 Downloads (Pure)

Abstract

We propose a simple model to assess the evolution of the US labor share and how automation affects employment. In our model, heterogeneous firms may choose a manual technology and hire a worker subject to matching frictions. Alternatively, they may choose an automated technology and produce using only machines (robots). Our model suggests that automation reduces the labor share but increases employment and wages. Furthermore, our model suggests that labor market institutions are unlikely to have played a major role in the fall of the US labor share after 1987. Instead, technological factors are a more promising candidate.
Original languageEnglish
Article number102146
Number of pages12
JournalLabour Economics
Volume75
Early online date16 Mar 2022
DOIs
Publication statusPublished - Apr 2022

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