Automation, Human Task Innovation, and Labor Share: Unveiling the Role of Elasticity of Substitution

Baek, Seungjin and Jeong, Deokjae (2023): Automation, Human Task Innovation, and Labor Share: Unveiling the Role of Elasticity of Substitution.

Abstract

This paper investigates the elements contributing to the change in labor share, with a specific focus on the roles of ‘automation’ and ‘innovation in human tasks.’ We construct a general equilibrium model that distinctly incorporates both robot and non-robot capital to derive an econometric specification. Using task data from O*NET and employing the most recently developed sentence embedding tools to match tasks and patents, we construct a novel ‘innovation in human tasks’ variable for multiple countries. This allows us to empirically evaluate the impact of innovation in human tasks on labor share across countries for the first time in the literature. Our accounting analysis suggests that the positive influence of human task innovation outweighs the adverse effects of automation in most of countries we study. From our regression analysis, we estimate the elasticity of substitution between labor and non-robot capital to be less than one, while the elasticity of substitution between tasks is greater than one. With these estimates, we elucidate the direct and indirect effects of automation and innovation in human tasks on labor share.

• Item Type: MPRA Paper
• Language: English
• Keywords: automation; tasks; labor share; robot; elasticity of substitution
• Subjects: D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; D - Microeconomics > D3 - Distribution > D33 - Factor Income Distribution; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E25 - Aggregate Factor Income Distribution; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O57 - Comparative Studies of Countries

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