Full Citation

Title: Labor-Technology Substitution: Implications for Asset Pricing

Citation Type: Miscellaneous

Publication Year: 2016

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Abstract: This paper studies the asset pricing implications of a firm’s opportunities to replace routine-task labor with automation. I develop a model in which firms optimally un- dertake this replacement when their productivity is low. Hence, firms with routine- task labor maintain a replacement option that hedges their value against unfavorable macroeconomic shocks and lowers their expected returns. Using establishment-level occupational data, I construct a measure of firms’ share of routine-task labor. Com- pared to their industry peers, firms with a higher share of routine-task labor (i) invest more in machines and reduce more routine-task labor during economic downturns, and (ii) have lower expected returns.

Url: https://www.marshall.usc.edu/sites/default/files/miaoz/intellcont/document %2864%29-1.pdf

User Submitted?: No

Authors: Zhang, Miao, B

Publisher: University of Southern California, University of Utah

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Other

Countries: United States