Labor cost, robots, and product quality

Junyi Xiang, Dongmin Kong and Fan Zhang

China Economic Review, 2025, vol. 90, issue C

Abstract: Labor cost has rapidly increased in the past decades. However, little is known about its effect on the firm-level robot adoption, and evidence about the consequences of robot adoption on firm production is limited. Based on a novel dataset of robot adoption at the firm-level, we use geographic discontinuity design to identify that labor costs significantly increase robot adoption and further improve product quality. Our findings are robust to alternative specifications and particularly pronounced for foreign firms, and firms with low financial constraints, and general trade, and firms more dependence on unskilled labor, and firms in higher position in the value chain. When adopting robots to substitute labor, firms tend to employ (layoff) skilled (unskilled) labors, which increases expenses on employee training.

Keywords: Labor cost; Robots; Minimum wage; Product quality; Geographic discontinuity (search for similar items in EconPapers)
JEL-codes: F2 G3 J3 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1043951X25000318
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:90:y:2025:i:c:s1043951x25000318

DOI: 10.1016/j.chieco.2025.102373

Access Statistics for this article

China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

More articles in China Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().