Munich Personal RePEc Archive

Explaining the labor share: automation vs labor market institutions

Guimarães, Luis and Gil, Pedro (2019): Explaining the labor share: automation vs labor market institutions.

This is the latest version of this item.

[img] PDF
MPRA_paper_94236.pdf

Download (538kB)

Abstract

We propose a simple model to assess the evolution of the US labor share and how automation affects employment. In our model, heterogeneous firms may choose a manual technology and hire a worker subject to matching frictions. Alternatively, they may choose an automated technology and produce using only machines (robots). Our model offers three main insights. First, automation-augmenting shocks reduce the labor share but increase employment and wages. Second, labor market institutions play an almost insignificant role in explaining the labor share. Third, the US labor share only (clearly) fell after 1987 because of a contemporaneous acceleration of automation’s productivity.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.