Manufacturing automation and its implications for local employment outcomes: Evidence from Sweden

Abstract

This study examines the relationship between firm-level automation in manufacturing and local labor market employment outcomes using 2001–2022 Swedish linked employer-employee data. I utilize a shift-share instrumental variable approach and obtain robust results that automation affects employment both directly in automating firms and indirectly in nonautomating firms and nonmanufacturing firms. Firms that embrace automation experience employment growth. These gains come at the expense of employment losses in nonautomating firms and other sectors, as labor flows in response to the shift in labor demand. By introducing regional heterogeneous impacts, this study further shows that the effects of automation differ across local labor markets because of the uneven spatiotemporal diffusion of automation technologies. The results outlined in this study shed light on the mechanisms underlying the uneven impacts of automation-induced structural change, both within and across regional economies.