Daisuke Adachi, Aarhus University

"Robots and Wage Polarization: The Effects of Robot Capital by Occupations"

Abstract

Robotization has been substituting workers in a wide range of occupations. To study the strength of this substitutability and the distributional impacts of robotization, I match unique data on imported robot prices with the occupational task information to measure the cost of using robots by occupation. The data reveal that the cost reduction by 10% induces a 1.2% drop in wages of production and transportation occupations in the US, suggesting strong substitutability. This finding motivates developing a model where robots are traded and can substitute for labor with different elasticities of substitution (EoS) across occupations. Using a model-implied optimal instrumental variable, I estimate higher EoS between robots and workers than those of general capital goods in production and transportation occupations. The estimated model implies that the adoption of industrial robots explains a 6.4 percent of the observed increase in the 90-50th percentile ratio of US occupational wages.

Contact person: Jakob Roland Munk