Industrial automation and local public goods

Recent research shows industrial automation raises labor productivity but also depresses employment and wages in exposed industries and regions. This paper examines the impact of automation on U.S. state and local governments. We find that state and local governments with greater exposure to automation experience significant declines in per capita revenues and expenditures. The spending reduction is concentrated in K-12 education and is driven primarily by a decrease in state support. Automation exposure is also associated with a decline in student test scores. These findings suggest that industrial automation impairs state and local financing of public education and student outcomes. • States with greater exposure to industrial automation collect less tax revenue. • They also reduce spending, primarily by cutting transfers to localities. • Local governments respond by spending less on K-12 education. • Automation exposure is associated with a decline in student test scores.