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Automation, Recessions, and Production Networks

Author

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  • Klemp, Marc

Abstract

This research shows that production networks make automation's wage effects state dependent: the speed of wage recovery differs sharply across economies, with differences particularly pronounced during recessions. I embed a standard ordered-task automation block in an input-output economy and decompose aggregate wage dynamics into a recovery push from improving task fundamentals and a general-equilibrium drag from recessionary reweighting of network pass-through. A key implication is convex amplification: the recession differential in automation's wage effect becomes more negative as network tightness rises. Using robot exposure (IFR), wages (EU KLEMS), and annual WIOD input-output tables for 24 EU countries (2000-2014), with an IV based on peer-country adoption, I find that a one-standard-deviation increase in network tightness raises the recession wage loss from a one-standard-deviation robot exposure increase by about 0.11 log points. The framework also delivers two diagnostics summarizing when task-level recovery survives network propagation.

Suggested Citation

  • Klemp, Marc, 2026. "Automation, Recessions, and Production Networks," CEPR Discussion Papers 21172, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:21172
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    More about this item

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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