Abstract

The rapid advances in automation technologies are disrupting labor markets at an unprecedented speed, contributing to the secular decline in US labor force participation, and raising questions about where workers end up. This paper investigates the margins of adjustment of workers after being displaced by the introduction of industrial robots. Exploiting exogenous variation in the adoption of robots across local labor markets over time, I show that almost 8 percent of non-participants respond by enrolling in college, 10.5 percent claim disability benefits, and 40 percent retire early. The remaining non-participants rely on the income of their household members or live off their savings. These margins differ with the socio-demographic characteristics of the individuals. My results also show that the rising disability take-up has been fueled by a deterioration in non-participants’ health, including self-reported health problems and hospitalizations related to severe mental disorders and substance abuse.

Keywords: industrial robots, labor force participation, margins of adjustment, health.

JEL Codes: I12, I26, J21, J26.

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