On the Substitution and Complementarity between Robots and Labor: Evidence from Advanced and Emerging Economies

Abstract

This paper aims to empirically study the short-term relationship between robot adoption and the labor market across a diverse set of advanced and emerging economies. Additionally, it seeks to analyze the impact of macroeconomic and institutional factors on this relationship. This study reveals robot adoption promotes employment growth in advanced economies, while it has a negative effect on employment in emerging economies. This heterogeneity can be attributed to both direct and indirect linkages between robots and labor in production. Directly, robots can either substitute or complement human labor. Indirectly, robot adoption stimulates output growth, leading to increased labor demand. We also show that the robot–labor relationship is influenced by macroeconomic variables such as development stage, unemployment rate, and education level, as well as institutional variables such as business regulation and structural reforms. These findings suggest the need for a more inclusive and sustainable approach to the advancement of robot adoption and automation.