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

Jeong, Deokjae and Baek, Seungjin and Peri, Giovanni (2024): Automation, Human Task Innovation, and Labor Share: Unveiling the Role of Elasticity of Substitution.

Abstract

This study examines the declining trend in global labor share across countries and sectors, focusing on the roles of robotic innovation (RI) and human innovation (HI). To address potential endogeneity, we construct instrumental variables using US patent data and large language models, calculating similarity scores between patent descriptions and robot descriptions for RI, and between patent descriptions and O*NET occupation descriptions for HI. Employing a general equilibrium model to derive our regression formula, our empirical findings reveal that RI negatively affects labor share, while HI has a positive impact. We estimate the elasticity of substitution between non-robot capital and labor to be less than one, aligning with most literature but differing from some previous studies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Human task innovation; Robotic innovation; Automation; Labor share 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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