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Fact of the Week: Developing Countries Are Leading Global Growth in Robot Adoption

Fact of the Week: Developing Countries Are Leading Global Growth in Robot Adoption

February 7, 2022

Source: Efraim Benmelech and Michal Zator, “Robots and Firm Investment,” National Bureau of Economic Research (NBER) Working Paper Series, January 2022.

Commentary: Despite alarmist reactions to global trends in increasing automation, recent data from the National Bureau of Economic Research (NBER) shows that robot installations over the past three decades have been driven predominantly by developing nations, and it has been happening as a means of driving economic growth, rather than as a means of substituting labor in rich countries. The researchers found that from 2000 to 2016 new robot adoption grew by roughly 70 percent in North America and Europe, whereas it grew more than 300 percent in the rest of the world. Yet robots so far have not had the same explosive adoption as ICT equipment; instead, their adoption is a force for catching up among developing countries seeking to grow their industrial economies for the 21st century.

This trend is further supported by NBER’s finding that automation is still consolidated across the world in only a handful of industries, primarily the automotive industry and other heavy manufacturing. Within these industries, the data shows automation has a net positive effect on employment growth, as NBER’s econometric analysis on firm-level data and employment in Germany found that each additional robot per 1,000 workers installed in the last five years has been associated with a 0.15 percentage point increase in 5-year employment growth. Their econometric evidence supports previous findings that the growth spurred by automation brings new labor demand to match or even exceed any labor substituted by robots. NBER’s findings in this report reflect that the growing trend of global robotization poses no threat to economywide labor markets. Rather, it is an opportunity for countries to bolster their competitive manufacturing and for firms in automation-leading industries to grow both output and employment.

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