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Automation, robots and wage inequality in Germany: A decomposition analysis

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  • Brall, Franziska
  • Schmid, Ramona

Abstract

We analyze how and through which channels wage inequality is affected by the rise in automation and robotization in the manufacturing sector in Germany from 1996 to 2017. Combining rich linked employer-employee data accounting for a variety of different individual, firm and industry characteristics with data on industrial robots and automation probabilities of occupations, we are able to disentangle different potential causes behind changes in wage inequality in Germany. We apply the recentered influence function (RIF) regression based Oaxaca-Blinder (OB) decomposition on several inequality indices and find evidence that besides personal characteristics like age and education the rise in automation and robotization contributes significantly to wage inequality in Germany. Structural shifts in the workforce composition towards occupations with lower or medium automation threat lead to higher wage inequality, which is observable over the whole considered time period. The effect of automation on the wage structure results in higher inequality in the 1990s and 2000s, while it has a significant decreasing inequality effect for the upper part of the wage distribution in the more recent time period.

Suggested Citation

  • Brall, Franziska & Schmid, Ramona, 2020. "Automation, robots and wage inequality in Germany: A decomposition analysis," Hohenheim Discussion Papers in Business, Economics and Social Sciences 14-2020, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
  • Handle: RePEc:zbw:hohdps:142020
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    References listed on IDEAS

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    More about this item

    Keywords

    Wage Inequality; Automation; Robots; Decomposition Method; RIFregression; Linked employer - employee data; Germany;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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