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Automating labor: evidence from firm-level patent data

Dechezlepretre, Antoine, Hemous, David, Olsen, Morten and Zanella, Carlo (2020) Automating labor: evidence from firm-level patent data. CEP Discussion Papers (1679). Centre for Economic Performance, LSE, London, UK.

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Abstract

Do higher wages lead to more automation innovation? To answer this question, we first introduce a new measure of automation by using the frequency of certain keywords in patent text to identify automation innovations in machinery. We validate our measure by showing that it is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. Then we build a firm-level panel dataset on automation patents. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of lowskill and high-skill wages. We find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 4. An increase in highskill wages tends to reduce automation innovation. Placebo regressions show that the effect is specific to automation innovations. Finally, we use the Hartz labor market reforms in Germany for an event study and find that they are associated with a relative reduction in automation innovations.

Item Type: Monograph (Discussion Paper)
Official URL: https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information: © 2020 The Authors
Divisions: Grantham Research Institute
Subjects: H Social Sciences > HD Industries. Land use. Labor
T Technology > T Technology (General)
H Social Sciences > HC Economic History and Conditions
JEL classification: O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O33 - Technological Change: Choices and Consequences; Diffusion Processes
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J20 - General
Date Deposited: 14 Jan 2021 14:42
Last Modified: 15 Jan 2021 00:48
URI: http://eprints.lse.ac.uk/id/eprint/108420

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