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The Distribution of Automation Rents with Centralized Bargaining

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  • Reichlin, Pietro

Abstract

When technical progress arises from the decreasing cost of machines performing tasks that are highly substitutable with some type of labor, perfect competition may exacerbate wage inequality and concentrate the benefits of economic growth on the workers who are performing less routine tasks. I study how centralized efficient bargaining reallocates automation-generated surplus across technologically heterogeneous worker groups (performing "routine" and "non-routine" tasks) and show that this redistribution can reverse the sign of the relationship between routine workers' productivity and their wage, although this may entail efficiency costs in terms of some unemployment for routine workers and excess investment in automation. I provide conditions for which the efficient bargaining wages are increasing in automation efficiency and show that routine labor employment may increase as automation gets cheaper and the efficiency cost of centralized bargaining gets very small when automation and routine labor are highly substitutable.

Suggested Citation

  • Reichlin, Pietro, 2026. "The Distribution of Automation Rents with Centralized Bargaining," CEPR Discussion Papers 22046, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:22046
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    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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