MACROECONOMICS OF AUTOMATION: EVIDENCE FROM THE IMPACT OF INDUSTRIAL ROBOTICS ON ECONOMIC OUTCOME

Abstract

Due to the 2008 Financial Crisis, COVID-19 pandemic and increasing international uncertainty, firms in developed countries are increasingly adopting more robots to reduce dependence on global supply chain. The paper contributes to existing literature by extending the data beyond 2007 and takes into account critiques to analyse the effect of robot adoption on economic outcomes for 1993-2017 and 2007-2017. The paper found that labour productivity growth increases significantly in 1993-2017 but dropped significantly in 2007-2017 due to an increase in robot adoption but does not affect 1993-2017 employment and 2007-2017 labour compensation at the aggregate level, even though there is a significant increase in employment and labour compensation in the manufacturing industries. Further observing the labour economic outcomes by skill groups in manufacturing industries, low skill employees fared even more poorly while high skill employees benefited from a significant increase in hours worked and labour compensation, widening the inequality gap.