How Does Automation Reshape the Labor Market: Evidence From China

Ziyue Zhang and Qiyangfan Feng

Review of Development Economics, 2026, vol. 30, issue 1, 458-469

Abstract: An increasing number of developing nations are currently undergoing an automation revolution. However, there is still a limited body of research on how automation is reshaping labor markets in these countries. In this article, we use the “shift‐share” method to construct a regional‐level indicator of automation exposure, and analyze the 2012–2018 China Resident Survey data using the fixed‐effects model and the 2SLS method to explore the complex impacts of automation on China's labor market. Our findings indicate that heightened levels of regional automation exposure correspond with a notable decline in local employment rates. This type of crowding‐out effect is concentrated on male workers and those in productive employment sectors, though automation simultaneously generates additional job opportunities for female workers. We observe a general devaluation in the workforce, primarily driven by reduced wage levels among male and low‐skilled labor cohorts. Contrary to the prevailing notion that “machines liberate labor,” our analysis reveals that automation actually increases the average daily working hours, thereby intensifying the workload rather than diminishing it. Furthermore, the impact of automation on the labor market appears to fluctuate with economic cycles and varies according to the strength of labor protections. Specifically, during periods of economic downturn, the adverse effects of automation on employment are exacerbated. Conversely, enhancements in the labor union system are found to mitigate the detrimental effects of automation on workers.

Date: 2026
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