The impact of local and foreign automation on labor market outcomes in emerging countries

In the XXI century, the labor market effects of automation have gained significant attention from scholars and policymakers alike. Concerns about potential negative effects are particularly relevant in emerging countries, where a rapid acceleration of robot adoption and an increasing involvement in global value chains have been observed in recent years, with the subsequent increase in exposure to foreign competition. This paper estimates the effect of local and foreign robots on labor market outcomes and labor shares using a panel dataset composed of 16 sectors and ten emerging countries from 2008 to 2014. The endogeneity of robots’ adoption is addressed with an instrumental variables approach and using a shift-share index of exposure to foreign robots. The main results for all sectors show that only foreign robot adoption, but not local, has affected employment, whereas no effects on the labor share are found. When exploring sectoral heterogeneity, we find that the foreign robots’ negative effect on employment has occurred in many sectors, being more prominent in those with higher exposure to foreign robots. Moreover, we found small and negative spillover effects of robots in other sectors on employment and wages in the newly industrialized countries examined. Finally, the results obtained when examining the sectoral heterogeneity of the effects show that the labor share is also affected in some sectors by both the use of robots in developed and emerging countries.

Author: Luis; Inmaculada, R. Diaz Pavez; Martinez-Zarzoso
Volume: 2023.01
Publisher: INFER
Year: 2023
No. of pages: 34
Working papers