When robots stay home: How automation creates jobs in the West without taking them from China

Abstract

Recent advances in automation have raised concerns about potential job displacement. Specifically, robot adoption in developed countries has the potential to lower employment in offshoring destinations by affecting trade patterns. This study explores the relationship between increased robot use in Europe and the U.S. on domestic employment and on one of the most dominant offshoring destinations, China. Using cross-country sector-level data on robot adoption, we find that the widespread use of robots increases total employment in Europe and the U.S. but has varied effects across sectors within these economies. Specifically, robots act as labour substitutes in agriculture, which is more than made up for in services. Moreover, industrial employment is largely unaffected by robot adoption in the United States but is negative in Europe. This suggests that much of the aggregate positive effects are driven by service employment. Furthermore, the estimates suggest that robot adoption in developed countries does not affect Chinese employment across sectors.