Robots and Export Quality

Abstract

Robots are rapidly becoming a key part
\n of manufacturing in developed and emerging economies. This
\n paper examines a new channel for how automation can affect
\n international trade: quality upgrading. Automation can
\n reduce production errors, particularly of repetitive
\n processes, leading to higher quality products. The effects
\n of robot use on export quality are estimated, by combining
\n cross-country and cross-industry data on industrial robots
\n with detailed Harmonized System 10-digit trade data. Robot
\n diffusion in (preexisting) foreign customers is used as an
\n instrumental variable to predict robot adoption in the home
\n country-industry. The findings show that robot diffusion
\n leads to increases in the quality of exported products.
\n Quality improvements are predominantly driven by the
\n upgrading of developing country exports; and within
\n countries, quality improvements are driven by upgrading of
\n (initially) lower-quality exports of developed and
\n developing countries. The paper also finds some differences
\n in the type of robots—sophisticated or more basic—associated
\n with quality gains in developing and developed economies.