The Effects of Automation Technology on Wage Inequality in Europe

Abstract: In recent decades, there have been increased investments in automation-related technology across several European industries. Parallel to this, industry-level labour share declines and differences in wage growth between demographic groups can be observed. This thesis examines the relationship between the increased technological investments and labour market outcomes of different demographic groups to uncover how increased exposure to automation technology has contributed to wage inequality between 2002-2018. The empirical strategy follows Acemoglu & Restrepo (2022) and links the wage change of demographic groups across ten European countries to their expected task displacement, quantified through their specialization in routine tasks and exposure to industries with labour share declines, both in a reduced form and instrumental variable specification. The main empirical findings suggest that there has been no significant effect of increased exposure to automation, specifically computers and software, on relative wages between groups in Europe between 2002-2018, contrasting previous results from the U.S.