Automation, Bargaining Power, and Labor Market Fluctuations

Sylvain Leduc, Zheng Liu · American Economic Journal Macroeconomics · 30 Sep 2024

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Abstract

We argue that the threat of automation weakens workers’ bargaining power in wage negotiations, dampening wage adjustments and amplifying unemployment fluctuations. We make this argument based on a business cycle model with labor market search frictions, generalized to incorporate automation decisions. In the model, procyclical automation threats create endogenous real wage rigidity that amplifies labor market fluctuations. The automation mechanism is consistent with empirical evidence. It is also quantitatively important for explaining the large volatilities of unemployment and vacancies relative to that of real wages, a puzzling observation through the lens of standard business cycle models. (JEL E13, E24, E32, J31, J63, J64)

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Published: 2024 (25 months ago)
Citations: 41 (OpenAlex)

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41 citations — 43rd percentile among the 23 indexed papers from 2024 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.

Automation, Bargaining Power, and Labor Market Fluctuations

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