Robots, Reshoring, and the Lot of Low-Skilled Workers

33 Pages Posted: 25 Jul 2018

See all articles by Astrid Krenz

Astrid Krenz

Durham University

Klaus Prettner

Institute of Economics; University of Goettingen (Göttingen); University of Vienna - Austrian Academy of Sciences; Vienna University of Technology - Institute for Mathematical Methods in Economics

Holger Strulik

University of Goettingen (Göttingen) - School of Law, Economics, Social Sciences

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Date Written: June 1, 2018

Abstract

We propose a theoretical framework to analyze the offshoring and reshoring decisions of firms in the age of automation. Our theory suggests that increasing productivity in automation leads to a relocation of previously offshored production back to the home economy but without improving low-skilled wages and without creating jobs for low-skilled workers. Since it leads also to increasing wages for high-skilled workers, automation induced reshoring is associated with an increasing skill premium and increasing inequality. Using a new measure of reshoring activity and data from the world input output table, we find evidence for a positive association between reshoring and the degree of automation. On average, within manufacturing sectors, an increase by one robot per 1000 employees is associated with a 3.5% increase of reshoring activity. We also provide evidence that reshoring is positively associated with wages and employment for high-skilled labor but not for low-skilled labor.

Keywords: Automation, Reshoring, Employment, Wages, Inequality, Tariffs

JEL Classification: F13, F62, J31, O33

Suggested Citation

Krenz, Astrid and Prettner, Klaus and Strulik, Holger, Robots, Reshoring, and the Lot of Low-Skilled Workers (June 1, 2018). Available at SSRN: https://ssrn.com/abstract=3206062 or http://dx.doi.org/10.2139/ssrn.3206062

Astrid Krenz (Contact Author)

Durham University ( email )

Durham, DH1 3HY
United Kingdom

Klaus Prettner

Institute of Economics ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

University of Goettingen (Göttingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

University of Vienna - Austrian Academy of Sciences ( email )

Sonnenfelsgasse 19/2
Wien, Osterreich A-1010
Austria

Vienna University of Technology - Institute for Mathematical Methods in Economics ( email )

Argentinierstr. 8
Vienna, 1040
Austria

Holger Strulik

University of Goettingen (Göttingen) - School of Law, Economics, Social Sciences ( email )

Germany

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