Robots, factor intensities, and wage inequality

Abstract

This paper investigates how robots affect wage inequality. We consider four cases, i.e. robots replacing skilled labor, robots replacing unskilled labor, robots replacing both skilled and unskilled labor, and robots serving as complements to human labor. Different from the existing literature on artificial intelligence and automation, we find that in all the four cases an increase in the importance of robots can increase or decrease wage inequality under different conditions. When robots are incorporated into the framework of wage inequality, factor intensities should be taken seriously.