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Automating labor: evidence from firm-level patent data


Dechezleprêtre, Antoine; Hémous, David; Olsen, Morten; Zanella, Carlo (2020). Automating labor: evidence from firm-level patent data. CEP Discussion Papers CEPDP1725, Centre for Economic Performance.

Abstract

Do higher wages lead to more automation innovation? To answer this question, we first introduce a new measure of automation by using the frequency of certain keywords in patent text to identify automation innovations in machinery. We validate our measure by showing that it is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. Then we build a firm-level panel dataset on automation patents. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of lowskill and high-skill wages. We find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 4. An increase in highskill wages tends to reduce automation innovation. Placebo regressions show that the effect is specific to automation innovations. Finally, we use the Hartz labor market reforms in Germany for an event study and find that they are associated with a relative reduction in automation innovations.

Abstract

Do higher wages lead to more automation innovation? To answer this question, we first introduce a new measure of automation by using the frequency of certain keywords in patent text to identify automation innovations in machinery. We validate our measure by showing that it is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. Then we build a firm-level panel dataset on automation patents. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of lowskill and high-skill wages. We find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 4. An increase in highskill wages tends to reduce automation innovation. Placebo regressions show that the effect is specific to automation innovations. Finally, we use the Hartz labor market reforms in Germany for an event study and find that they are associated with a relative reduction in automation innovations.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:O31, O33, J20
Language:English
Date:February 2020
Deposited On:07 Oct 2020 15:41
Last Modified:07 Oct 2020 15:41
Series Name:CEP Discussion Papers
Number of Pages:107
ISSN:2042-2695
OA Status:Green
Free access at:Official URL. An embargo period may apply.
Official URL:http://cep.lse.ac.uk/_new/publications/abstract.asp?index=6895

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