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

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

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 aver- age, within manufacturing sectors, an increase by one robot per 1000 workers is associated with a 3.5% 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.

Suggested Citation

  • Krenz, Astrid & Strulik, Holger & Prettner, Klaus, 2019. "Robots, Reshoring, and the Lot of Low-Skilled Workers," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203602, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc19:203602
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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.
    2. de Vries, Gaaitzen J. & Gentile, Elisabetta & Miroudot, Sébastien & Wacker, Konstantin M., 2020. "The rise of robots and the fall of routine jobs," Labour Economics, Elsevier, vol. 66(C).
    3. Abeliansky, Ana & Algur, Eda & Bloom, David E. & Prettner, Klaus, 2020. "The Future of Work: Challenges for Job Creation Due to Global Demographic Change and Automation," IZA Discussion Papers 12962, Institute of Labor Economics (IZA).
    4. Martin Labaj & Stracova Erika, 2019. "Drivers of Deindustrialisation: Sub-system Analysis of Internationally Fragmented Production Structures," Department of Economic Policy Working Paper Series 018, Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava.
    5. David Klenert & Enrique Fernandez-Macias & Jose-Ignacio Anton, 2020. "Do robots really destroy jobs? Evidence from Europe," JRC Working Papers on Labour, Education and Technology 2020-01, Joint Research Centre (Seville site).
    6. Faber, Marius, 2020. "Robots and reshoring: Evidence from Mexican labor markets," Journal of International Economics, Elsevier, vol. 127(C).
    7. Altenburg, Tilman & Chen, Xiao & Lütkenhorst, Wilfried & Staritz, Cornelia & Whitfield, Lindsay, 2020. "Exporting out of China or out of Africa? Automation versus relocation in the global clothing industry," Discussion Papers 1/2020, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE).

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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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