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The US labor share has declined, especially in manufacturing and retail. Yet,
the labor share of a typical firm in these sectors has risen. We introduce a model
where firms incur fixed costs to automate tasks. A decline in the price of capital
goods used for automation reproduces the observed patterns: large firms automate
tasks, reducing the aggregate labor share, while the median firm continues to operate
a labor-intensive technology. When calibrating the automation fixed costs to match
the observed adoption heterogeneity, the model generates the aggregate and firm-level
facts quantitatively in response to lower capital prices, especially in manufacturing.
