Title: Technology Adoption, Household Uncertainty and Wealth Inequality
Abstract: We show that automation represents a source of background risk for routine workers, and it crowds out the risk of their financial portfolio. We exploit the variation in state adoption of Section 179 deduction limits to extract exogenous variation in workplace automation. Following a $100,000 increase in deduction limit, routine workers experience a 0.8% increase in layoff probability and reduce their stock share of liquid wealth by 4% over a four-year period. This effect is not driven by differences in household characteristics, endogenous occupational choice, or aggregate economic factors. The background risk effect is weaker when workers have greater access to government-sponsored or self-sponsored insurance. Finally, we show that the reduction in stock share adversely affects the average return on liquid wealth and the long-term wealth accumulation by routine workers.
Publication Year: 2020
Publication Date: 2020-01-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot