Have Robots Grounded the Flying Geese?: Evidence from Greenfield FDI in Manufacturing
Mary Hallward-Driemeier and
Gaurav Nayyar
No 9097, Policy Research Working Paper Series from The World Bank
Abstract:
For decades, manufacturers around the world have outsourced production to countries with lower labor costs. However, there is a concern that robotization in high-income countries will challenge this shifting international division of labor known as the"flying geese"paradigm. Greenfield foreign direct investment decisions constitute a forward-looking indicator of where production is expected, rather than trade flows that reflect past investment decisions. Exploiting differences across countries and industries, the intensity of robot use in high-income countries has a positive impact on foreign direct investment growth from high-income countries to low- and middle-income countries over 2004-15. Past a threshold, however, increased robotization in high-income countries has a negative impact on foreign direct investment growth. Only 3 percent of the sample exceeds the threshold level beyond which further automation results in negative foreign direct investment growth and is consistent with re-shoring. For another 25 percent of the sample, the impact of robotization on the growth of foreign direct investment is positive, but at a rate that is declining. So, although these are early warning signs, automation in high-income countries has resulted in growing foreign direct investment for more than two-thirds of the sample under consideration. Some geese may be slowing, but for now, most continue to fly.
Keywords: Common Carriers Industry; Food&Beverage Industry; Pulp&Paper Industry; General Manufacturing; Construction Industry; Business Cycles and Stabilization Policies; Plastics&Rubber Industry; Textiles; Apparel&Leather Industry; International Trade and Trade Rules; Transport Services; Labor Markets; Rural Labor Markets; Trade and Services (search for similar items in EconPapers)
Date: 2019-12-26
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:9097
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