Digitization and Automation: Firm Investment and Labor Outcomes
By Michał Zator
AI, automation and other digital technologies are thought to be transforming the economy, but the empirical evidence on their diffusion and impact is scarce. This paper uses new firm-level administrative data from Germany to analyze causes and consequences of firms’ investment in the new technology – digitization and automation. Main results characterize relationship of technology and labor: (1) investment in technology is typically increased by labor scarcity; (2) new technologies typically reduce employment. Both results hide important heterogeneity across industries: aggregate substitution patterns are driven e.g. by manufacturing or trade, but complementarity dominates e.g. in IT or finance. For identification, in (1) I use variation in labor scarcity driven by population aging, and in (2) difference-in-differences across high- and low-adoption areas and industries. Additional results demonstrate that financial constraints impede technology adoption and that technology increases skill level of the workforce and labor productivity. Overall, the effects of new technologies significantly vary across industries, firms and types of workers, highlighting the importance of considering a broad set of technologies and studying patterns of their adoption by firms.
Source: SSRN
