Working Papers

2020-19 | May 2020

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Can Pandemic-Induced Job Uncertainty Stimulate Automation?

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The COVID-19 pandemic has raised concerns about the future of work. The pandemic may become recurrent, necessitating repeated adoptions of social distancing measures (voluntary or mandatory), creating substantial uncertainty about worker productivity. But robots are not susceptible to the virus. Thus, pandemic-induced job uncertainty may boost the incentive for automation. However, elevated uncertainty also reduces aggregate demand and reduces the value of new investment in automation. We assess the importance of automation in driving business cycle dynamics following an increase in job uncertainty in a quantitative New Keynesian DSGE framework. We find that, all else being equal, job uncertainty does stimulate automation, and increased automation helps mitigate the negative impact of uncertainty on aggregate demand.

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Article Citation

Leduc, Sylvain, and Zheng Liu. 2020. "Can Pandemic-Induced Job Uncertainty Stimulate Automation?," Federal Reserve Bank of San Francisco Working Paper 2020-19. Available at https://doi.org/10.24148/wp2020-19