The Impact of Local and Foreign Automation on Labor Market Outcomes in Emerging Countries

31 Pages Posted: 8 Jul 2021

See all articles by Luis R. Diaz Pavez

Luis R. Diaz Pavez

University of Goettingen (Göttingen) - Ibero American Institute for Economic Research

Inmaculada Martínez-Zarzoso

University of Goettingen (Göttingen) - School of Law, Economics, Social Sciences; Jaume I University - Department of Economics

Date Written: June 25, 2021

Abstract

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 has 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 variable approach and using a shift-share index of exposure to foreign robots. When all sectors are considered, the main results 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’ effect on employment has mainly occurred in the agricultural and industrial machinery sectors, the former being driven by a reduction of offshoring and affecting nearly 60% of jobs in emerging countries.

Keywords: Automation, Labor markets, Inequality, Emerging countries

JEL Classification: J23, O33, F16

Suggested Citation

Diaz Pavez, Luis R. and Martínez-Zarzoso, Inmaculada, The Impact of Local and Foreign Automation on Labor Market Outcomes in Emerging Countries (June 25, 2021). Available at SSRN: https://ssrn.com/abstract=3874507 or http://dx.doi.org/10.2139/ssrn.3874507

Luis R. Diaz Pavez (Contact Author)

University of Goettingen (Göttingen) - Ibero American Institute for Economic Research ( email )

Platz der Goettinger sieben 3
Goettingen, 37075
Germany

Inmaculada Martínez-Zarzoso

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

Germany

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

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