Automation and stock market participation

In this study, we explore whether automation affects household stock market participation. Utilizing data from the International Federation of Robotics, the China Household Finance Survey and the China City Statistical Yearbook, we find that households residing in cities with a higher level of density of industrial robots exhibit lower participation in the stock market at both the extensive and intensive margins. This negative impact is more pronounced among middle-aged and low-skilled workers. Furthermore, the growth of the gig economy can mitigate these adverse effects. Our results withstand a variety of robustness checks. To shed light on the mechanisms, we explore the impact of automation on the reduction of household labor income and the rise of unemployment risk. We find that city-level automation decreases labor income levels while increasing the expected unemployment risk of household heads. Our study adds to the literature by documenting automation to be a meaningful predictor of stock market participation.