Automation, Goods and Labor Markets Imperfections, and Labor Share

This study hypothesizes that the decline in labor shareDecline in labor share coincides with the goods market concentration and the decline in the bargaining power of labor unions. By incorporating automated capital as well as traditional capitalTraditional capital into the model with goods and labor market imperfections, this study derives the labor share which is an increasing and concave function with the degree of goods market competition. This implies that the goods market concentrationGoods market concentration associated with the rising markup over costMarkup over cost decreases labor shareLabor share. With the low bargaining power of labor unionsLabor union, the labor shareLabor share in the automation model is lower than that without automation for a valid degree of goods market competition, which implies that automation decreases labor share. The labor share is an increasing function of the bargaining power of labor unions. Moreover, the labor share in the automation model is a concave function with the bargaining power of labor, whereas the labor share without automation is linear. When automated capital exists, the decline in the bargaining power of labor decreases labor share remarkably.