Robot adoption and labor demand: A new interpretation from external competition

Abstract

Recent research has shown that robotics has increased economic efficiency in several areas. However, there is no consensus on whether the robot adoption in production should be encouraged, as there is widespread concern about unemployment and its consequences. This study compares the labor demands of robot adopters and non-adopters using a matching method. The results show that robotics increases rather than replace human labor, particularly providing the possibility of active hiring for female employees. However, while robots are installed in firms that implement robotics strategies, workers in non-adopting firms appear to be more vulnerable to the threat. Since robotics will widen the productivity gap between adopters and non-adopters while improving firm productivity, thereby increasing the risk of market exit for non-adopters and posing threats to their workforces. In other words, attempts to limit robot adoption to protect employment may be self-defeating due to external competition. Our findings provide a new explanatory framework for employment changes caused by robotics and offer new insights into whether firms should adopt robots in production.