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Robots, reshoring, and the lot of low-skilled workers

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  • Krenz, Astrid
  • Prettner, Klaus
  • Strulik, Holger

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. We develop a measure for reshoring activity at the macro-level and, using data from the world input output table, provide evidence for automation-driven reshoring. On average, within manufacturing sectors, an increase by one robot per 1000 workers is associated with a 3.5% increase of reshoring activity. We corroborate the results using an IV regression framework. We also provide the first cross-country evidence that reshoring is positively associated with wages and employment for workers in professional occupations but not for workers in elementary-routine occupations and that tariffs increase the reshoring intensity.

Suggested Citation

  • Krenz, Astrid & Prettner, Klaus & Strulik, Holger, 2021. "Robots, reshoring, and the lot of low-skilled workers," European Economic Review, Elsevier, vol. 136(C).
  • Handle: RePEc:eee:eecrev:v:136:y:2021:i:c:s0014292121000970
    DOI: 10.1016/j.euroecorev.2021.103744
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    More about this item

    Keywords

    Automation; Reshoring; Employment; Wages; Inequality; Tariffs;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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