The impact of automation on labour market outcomes in emerging countries

Abstract

The labour market effects of automation have gained significant attention from scholars and policymakers. Concerns about negative effects are important in emerging countries, where a rapid acceleration of robot adoption and an increasing involvement in global value chains have been observed in recent years, with the subsequent increase in exposure to foreign competition. This paper estimates the effect of local and foreign robots on labour market outcomes and labour shares using a panel dataset composed of 16 sectors and ten emerging countries from 2008 to 2014. The endogeneity of robots' adoption is addressed with an instrumental variables approach and using a shift-share index of exposure to foreign robots. The main results for all sectors show that foreign robot adoption has negatively affected employment in emerging countries. When exploring sectoral heterogeneity, we find that the foreign robots' negative effect on employment has occurred in many sectors, being more prominent in those with higher exposure to foreign robots. Moreover, we found small and negative inter-sectoral spillover effects of local robots on employment and wages. Finally, the results also show that the labour share is affected in some sectors of emerging countries by both the use of local and foreign robots.