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

Author

Listed:
  • 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, we 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. Using robots in countries with similar sectoral structure as an instrument, we find that an increase by one robot per 1000 workers causes a 2.5% increase of reshoring activity. We also provide the first cross-country evidence that reshoring is positively associated with wages and employment for high-skilled labor but not for low-skilled labor and that tariffs increase the degree of reshoring.

Suggested Citation

  • Krenz, Astrid & Prettner, Klaus & Strulik, Holger, 2020. "Robots, Reshoring, and the Lot of Low-Skilled Workers," GLO Discussion Paper Series 443, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:443
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    References listed on IDEAS

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    Cited by:

    1. Stemmler, Henry, 2019. "Does automation lead to de-industrialization in emerging economies? Evidence from Brazil," Center for European, Governance and Economic Development Research Discussion Papers 382, University of Goettingen, Department of Economics.

    More about this item

    Keywords

    Automation; Reshoring; Employment; Wages; Inequality; Tariffs;

    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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