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Labor Supply and Automation Innovation

Author

Listed:
  • Alexander M. Danzer
  • Carsten Feuerbaum
  • Fabian Gaessler

Abstract

While economic theory suggests substitutability between labor and capital, little evidence exists regarding the causal effect of labor supply on inventing labor-saving technologies. We analyze the impact of exogenous changes in regional labor supply on automation innovation by exploiting an immigrant placement policy in Germany during the 1990s and 2000s. Difference-in-differences estimates indicate that one additional worker per 1,000 manual and unskilled workers reduces automation innovation by 0.05 patents. The effect is most pronounced two years after immigration and confined to industries containing many low-skilled workers. Labor market tightness and external demand are plausible mechanisms for the labor-innovation nexus.

Suggested Citation

  • Alexander M. Danzer & Carsten Feuerbaum & Fabian Gaessler, 2020. "Labor Supply and Automation Innovation," Working Papers 198, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:198_danzerfeuerbaumgaessler
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    File URL: https://bgpe.cms.rrze.uni-erlangen.de/files/2023/07/198_Labor-Supply-and-Automation-Innovation.pdf
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    Citations

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    Cited by:

    1. Mann, Katja & Pozzoli, Dario, 2022. "Automation and Low-Skill Labor," IZA Discussion Papers 15791, IZA Network @ LISER.
    2. Yvonne Giesing, 2023. "The Impact of Technological Change on Immigration and Immigrants," CESifo Working Paper Series 10876, CESifo.
    3. Evgenidis Anastasios & Fasianos Apostolos & Papapanagiotou George & Lazarou Nicholas Joseph, 2025. "From Funding to Frontier: Public R&D and AI Innovation Across European Regions," JRC Working Papers on Territorial Modelling and Analysis 2025-12, Joint Research Centre.
    4. Alexander M Danzer & Natalia Danzer & Carsten Feuerbaum, 2024. "Military spending and innovation: learning from 19th-century world fair exhibition data," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(4), pages 831-854.
    5. Rude, Britta & Giesing, Yvonne, 2022. "Technological Change and Immigration - A Race for Talent or of Displaced Workers," VfS Annual Conference 2022 (Basel): Big Data in Economics 264093, Verein für Socialpolitik / German Economic Association.
    6. Andreas Lichter & Max Löffler & Ingo E. Isphording & Thu-Van Nguyen & Felix Poege & Sebastian Siegloch, 2025. "Profit Taxation, R&D Spending, and Innovation," American Economic Journal: Economic Policy, American Economic Association, vol. 17(1), pages 432-463, February.
    7. Mann, Katja & Pozzoli, Dario, 2024. "Robots and immigration," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).
    8. Anna Gumpert & Kalina Manova & Cristina Rujan & Monika Schnitzer, 2025. "Multinational firms and global innovation," CEP Discussion Papers dp2083, Centre for Economic Performance, LSE.

    More about this item

    Keywords

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    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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