The adjustment of labor markets over automation cycles: An analysis of European regions

Pillars Report

The paper examines the long-run versus short-run implications for labour markets of exposure to four automation technologies—robots, communication, information and software and databases. By applying a multiple break-point algorithm we identify investment cycles for each technology as affecting employment, wages, and wage shares for 163 NUTS-2 regions in 12 European countries over 1995-2017. In the long run, we find that robots have increased employment but reduced wages and the wage share in the region. ICT have had some positive impact on employment and wages, but mildly significant. Software and database have had a negative impact on employment, but no effect on wages. When we distinguish for shorter investment cycles, we find that the long run effect is concentrated in specific cycles, which often cancel out in the long run. For example, for robots the long-run positive effect on employment is driven by the investment during the downward cycle between 2006-2013.