American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Automation, Bargaining Power, and Labor Market Fluctuations
American Economic Journal: Macroeconomics
vol. 16,
no. 4, October 2024
(pp. 311–49)
Abstract
We argue that the threat of automation weakens workers' bargaining power in wage negotiations, dampening wage adjustments and amplifying unemployment fluctuations. We make this argument based on a business cycle model with labor market search frictions, generalized to incorporate automation decisions. In the model, procyclical automation threats create endogenous real wage rigidity that amplifies labor market fluctuations. The automation mechanism is consistent with empirical evidence. It is also quantitatively important for explaining the large volatilities of unemployment and vacancies relative to that of real wages, a puzzling observation through the lens of standard business cycle models.Citation
Leduc, Sylvain, and Zheng Liu. 2024. "Automation, Bargaining Power, and Labor Market Fluctuations." American Economic Journal: Macroeconomics, 16 (4): 311–49. DOI: 10.1257/mac.20220181Additional Materials
JEL Classification
- E13 General Aggregative Models: Neoclassical
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- J31 Wage Level and Structure; Wage Differentials
- J63 Labor Turnover; Vacancies; Layoffs
- J64 Unemployment: Models, Duration, Incidence, and Job Search
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