Labor Supply and Automation Innovation

Abstract

While economic theory suggests substitutability between labor and capital, little evidence exists regarding the causal effect of labor supply on inventing labor-saving technologies. We analyze the impact of exogenous changes in regional labor supply on automation innovation by exploiting an immigrant placement policy in Germany during the 1990s and 2000s. Difference-indifferences estimates indicate that one additional worker per 1,000 manual and unskilled workers reduces automation innovation by 0.05 patents. The effect is most pronounced two years after immigration and confined to industries containing many low-skilled workers. Labor market tightness and external demand are plausible mechanisms for the labor-innovation nexus.

Profit Taxation, R&D Spending, and Innovation

“…25 Citation-adjusted weighted counts are widely used in the literature and have been shown to correlate well with real-world measures of innovation quality such as profitability (see, e.g., Harhoff et al, 2003, Kogan et al, 2017, Moser et al, 2018. Relying on data from Danzer et al (2020), we further distinguish product from process innovations. To group patents along this margin, information from the highly standardized patents' claims texts is used.…”

“…Following Danzer et al (2020), we further use detailed textual information from the patent application files to distinguish product from process innovations. Product innovations generally relate to new or substantially-altered products that may lead to high social returns.…”

Regional Cooperation and Integration in Asia and the Pacific: Responding to the COVID-19 Pandemic and “Building Back Better”

“…Global value chains (GVCs) leverage the efficiencies brought about by cross-border trade and investment, and migration accelerates knowledge spillovers across borders. Recent research suggests that immigration can reduce incentives of recipient countries to automate or move production offshore (Danzer, Feuerbaum, and Gaessler 2020;Olney and Pozzoli 2021).…”

Induced Automation: Evidence from Firm-level Patent Data

“…2 Andersson, Karadja and Prawitz (2020) look at the effect of emigration to the US in the 19 th century in Sweden and find that more exposed municipalities experienced an increase in innovation (but they do not identify automation innovations). In a paper subsequent to ours, Danzer, Feuerbaum and Gaessler (2020) exploit German immigrant settlement policy to show that increases in labor supply discourage local automation innovation, while we exploit firm-level variation and focus on the effect of labor cost on global innovation.…”