The macroeconomics of automation: Data, theory, and policy analysis

•We develop an empirically relevant GE model of automation and labor markets.•We evaluate the retraining of workers who were adversely affected by automation.•We evaluate redistribution policies. The decline in middle-wage occupations and rise in automation over the last decades are at the center of policy discussions. We develop an empirically relevant general equilibrium model that features endogenous labor force participation, occupational choice, and automation capital. We use the model to consider two types of policies: the retraining of workers who were adversely affected by automation, and redistribution policies that transfer resources to these workers. Our framework emphasizes general equilibrium effects such as displacement effects of retraining programs, complementarities between the factors of production, and the effects of distortionary taxation that is required to fund these programs.