Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1382: Artificial Intelligence, Robotics, Work and Productivity: The Role of Firm Heterogeneity

Fredrik Heyman (), Pehr-Johan Norbäck () and Lars Persson ()
Additional contact information
Fredrik Heyman: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Pehr-Johan Norbäck: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Lars Persson: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Abstract: We propose a model with asymmetric firms where new technologies displace workers. We show that both leading (low-cost) firms and laggard (high-cost) firms increase productivity when automating but that only laggard firms hire more automation-susceptible workers. The reason for this asymmetry is that in laggard firms, the lower incentive to invest in new technologies implies a weaker displacement effect and thus that the output-expansion effect on labor demand dominates. Using novel firm-level automation workforce probabilities, which reveal the extent to which a firms’ workforce can be replaced by new AI and robotic technology and a new shiftshare instrument to address endogeneity, we find strong empirical evidence for these predictions in Swedish matched employer-employee data.

Keywords: AI&R Technology; Automation; Job displacement; Firm Heterogeneity; Matched employer-employee data

JEL-codes: D20; J24; L20; O33

57 pages, First version: February 9, 2021. Revised: February 11, 2021. Earlier revisions: February 11, 2021.

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