Explaining the Labor Share: Automation Vs Labor Market Institutions

We propose a simple model to assess the evolution of US labor share and how automation affects employment. In our model, heterogeneous firms may choose manual technology hire worker subject matching frictions. Alternatively, they an automated produce using only machines (robots). Our suggests that reduces but increases employment wages. Furthermore, market institutions are unlikely have played major role in fall after 1987. Instead, technological factors more promising candidate.