Elasticity of substitution between robots and workers: Theory and evidence from Japanese robot price data

Daisuke Adachi · Journal of Monetary Economics · 29 Apr 2025

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Abstract

This paper examines the wage effects of the increased use of industrial robots, focusing on their role in specific tasks and international trade. I construct a novel dataset by tracking shocks to the cost of acquiring robots from Japan, termed the Japan Robot Shock (JRS), and analyze these shocks across different occupations that have adopted robots. A general equilibrium model incorporating robot automation in a large open economy is developed, and a model-implied optimal instrumental variable of the JRS is constructed to address the identification challenges posed by the correlation between automation shocks and the JRS. The study finds that the elasticity of substitution (EoS) between robots and labor is heterogeneous across occupations, reaching up to 3 in production and material moving occupations, which is significantly higher than the EoS between other capital goods and labor. These findings underscore the importance of targeted policy to help workers adapt and mitigate potential wage pressures. • Novel dataset tracks cost shocks in Japanese robot adoption across occupations. • General equilibrium model incorporates international robot trade and labor effects. • Elasticity of substitution between robots and labor varies across occupation types. • Counterfactuals reveal how automation affected U.S. occupational wages (1990–2007). • These findings stress targeted policies to help workers adapt, curb wage pressures.

About this publication

Leading field journal. A leading journal in economics or a neighbouring field (on the Tinbergen Institute’s A list or near the top of the RePEc ranking), or a top-rated computer-science venue.

Placed by: Tinbergen Institute A list. How sources are ranked.

Published: 2025 (18 months ago)
Citations: 4 (OpenAlex)

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4 citations — 42nd percentile among the 33 indexed papers from 2025 in this collection. Citation counts favor older papers; this compares only same-year papers here, not the whole literature.

□ added to this collection in 2026.

author affiliation matches seed institution aarhus university — part of why this paper is in the collection.

Elasticity of substitution between robots and workers: Theory and evidence from Japanese robot price data

Abstract

About this publication

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