Automation and Income Inequality in Europe

This article examines the impact of industrial robot adoption on household income inequality in 14 European countries between 2006 and 2018. Automation reduced relative wages, employment, and market incomes of more exposed demographic groups. However, feeding these automation-induced wage and employment shocks into the EUROMOD microsimulation model shows that their effect on inequality in disposable household income was small. Tax-benefit systems, particularly transfers, largely absorbed the disequalizing labor income shocks caused by automation. Household labor income diversification cushioned the automation-induced labor income shocks, but played a limited role for inequality.