Searching for robots

Abstract

This paper relaxes the frequently adopted assumption of a frictionless market for robots in favor of a frictional market featuring firms that search for robot inventors with whom they match and bargain the robot price, and sheds light on its consequences in a structural model estimated for the US economy. A frictional robot market renders the diffusion of automation relatively rigid and persistent, with several implications. First, it relatively disconnects the labor market conditions from the robot market conditions and, thereby, weakens the labor displacement effect of automation and the automation threat. Second, it strengthens the present value of vacancies and, thereby, job creation and the volatility of labor market aggregates. Third, it renders aggregate productivity more sluggish. Under such a market, more than half of the fluctuations in the automation probability and the robot price stem from business-cycle forces.