Technology, Automation and Inequality

The last 40 years have witnessed a rise of inequality in the developed world. During this period, the labor share in national income declined from 66% to about 58%, in part due to the emergence of large firms with high sales but low employment and labor shares. These facts raised a need for understanding the causes and consequences of these developments. This project explores the contribution of technology, and in particular, new automation technologies, to these trends. The project will use a new survey that contains detailed information on the use of artificial intelligence, robotics, specialized software, and dedicated machinery among a large number of US firms from all economic sectors. Specifically, the research will provide a comprehensive overview of the adoption of advanced technologies and how they vary across firms by industry, location, cohort, size class, as well as the motivation for adopting these technologies. The project will further study the implications of the adoption of these technologies for the workforce by taking into account differences in the skills demanded by firms that use or supply automation technologies. Finally, the research will study the contribution of advanced technologies to the rise in sales concentration and the emergence of large dominant firms with high sales but low employment and labor shares. The project will have policy and regulatory implications for technology, labor markets and industrial organization.

This project will study the determinants and consequences of the adoption of advanced automation technologies across US firms. Using detailed new data on technology adoption among a large number of US firms, the project will provide stylized facts on technology adoption. Adoption rates are still low, especially for artificial intelligence and robotics. However, adoption concentrates on large firms, which account for a significant share of employment, especially in manufacturing. Furthermore, adoption of technologies have the explicit objective of automating tasks previously performed by labor. Second, the project will study the implications of the adoption of these technologies for the workforce. Firms adopting advanced technologies report no overall changes in employment but a significant increase in their demand for skilled workers. Using granular employer-employee data, the project will explore this issue empirically by documenting differences in skill mix among technology adopters and non-adopters. Based on these differences, the project will develop a methodology to quantify the contribution of advanced technologies to changes in the demand for skills across firms, by industry, region, and for the overall nation. The research will further examine the role of advanced technologies in relation to sales concentration, firm size and labor share. The project will explore the notion that part of the higher labor productivity among large firms is due to their adoption of advanced technologies and may not necessarily reflect higher markups. Moreover, the skewed adoption of these technologies among large firms partly accounts for the rise in sales concentration seen in some industries.