The impact of automation on inequality across Europe
Mary Kaltenberg & Neil Foster-McGregor
#2020-009
Existing research suggests that automation has the potential to impact
inequality through two channels, either by changing the relative wage
returns for different sets of tasks or by changing the composition of
employment. This paper measures the relative importance of these two
channels for a sample of European countries by decomposing the effects
of a set of characteristics along these two dimensions using the
structure of earnings survey (SES) and data for 2002 and 2014 Firpo et
al. (2018). The approach isolates changes in the earnings distribution
to identify the component that is due to changes in composition and to
changes in the wage structure. We find that the risk of automation has
the largest impact on inequality in our sample of European countries.
The composition effect explains a large part of automation related
inequality in all of the countries, but the wage effect is also relevant
in half of the countries. These results confirm that the way in which
technology is increasing inequality is largely due to the fact that
there is a growing wage dispersion between jobs that are resilient to
automation and those that are not.
JEL classifications: 03, J3, J31, D63
Keywords: Inequality, Technological Change, Labor Markets, Wage Structure