Robots, Exports and Top Income Inequality: Evidence for the U.S.

Abstract

The last decades have witnessed a revolution in manufacturing production characterized by increasing technology adoption and a strong expansion of international trade. Simultaneously, the income distribution has exhibited both polarization and concentration among the richest. Combining datasets from the U.S. Census Bureau, the U.S. Internal Revenue Service, the International Federation of Robotics, EU KLEMS, and COMTRADE, we study the causal effect of industrial automation on income inequality in the U.S. during 2010–2015. We exploit spatial and time variations in exposure to robots arising from past differences in industry specialization across U.S. metropolitan areas and the evolution of robot adoption across industries. We document a robust positive impact of robotics on income for only the top 1 percent of taxpayers, which is largest for top income fractiles. Therefore, industrial automation fuels income inequality and, particularly, top income inequality. According to our estimates, one more robot per thousand workers results in relative increments of the total taxable income accruing to fractiles P99 to P99.9, P99.9 to P99.99 and P99.99 to P100, of 2.1 percent, 3.5 percent and 5.9 percent, respectively. We also find that robotization leads to increased exports to high-income and upper-middle-income economies, and that this is one of the key mechanisms behind the surge in top income inequality.