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Automation, Growth and Factor Shares

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  • Joseba Martinez

    (New York University)

Abstract

This paper investigates the extent to which automation can explain the observed fall in labor's share of income in the United States in the last 30 years. I model the production process as a set of tasks that can be performed by labor or automated machinery (capital). Aggregating over firms that operate capital with differing degrees of automation, total output of the economy is given by a Constant Elasticity of Substitution (CES) function, but with parameters determined endogenously by the distribution of automation technology across firms. This model of the aggregate production function can reconcile three important empirical findings on US production and growth that the canonical CES model cannot: declining labor shares, aggregate capital-labor complementarity, and capital-biased technical progress. Using industry-level data, including a novel measure of aggregate task inputs into production, I find evidence that automation was a significant driving force of the US labor share between 1972-2010.

Suggested Citation

  • Joseba Martinez, 2018. "Automation, Growth and Factor Shares," 2018 Meeting Papers 736, Society for Economic Dynamics.
  • Handle: RePEc:red:sed018:736
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    References listed on IDEAS

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    Cited by:

    1. Matias Covarrubias & Germán Gutiérrez & Thomas Philippon, 2019. "From Good to Bad Concentration? U.S. Industries over the Past 30 Years," NBER Chapters,in: NBER Macroeconomics Annual 2019, volume 34 National Bureau of Economic Research, Inc.
    2. Gilbert Cette & Lorraine Koehl & Thomas Philippon, 2019. "Labor Shares in Some Advanced Economies," NBER Working Papers 26136, National Bureau of Economic Research, Inc.
    3. German Gutierrez & Sophie Piton, 2019. "Revisiting the Global Decline of the (Non-Housing) Labor Share," Discussion Papers 1913, Centre for Macroeconomics (CFM).
    4. Gutiérrez, Germán & Piton, Sophie, 2019. "Revisiting the global decline of the (non-housing) labor share," Bank of England working papers 811, Bank of England.

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