PRODUCTIVE ROBOTS AND INDUSTRIAL EMPLOYMENT: THE ROLE OF NATIONAL INNOVATION SYSTEMS

Chrystalla Kapetaniou and Christopher A. Pissarides

International Economic Review, 2025, vol. 66, issue 1, 25-52

Abstract: In a model with robots, automatable and nonautomatable production, we study robot‐labor substitutions and show how they are influenced by a country's “innovation system.” Substitution depends on demand and production elasticities, the country's innovation capabilities, and openness. Making use of World Economic Forum data, we estimate the relationship for 13 countries and find that countries with poor innovation capabilities substitute robots for workers much more than countries with richer innovation capabilities, which might complement them. Innovation capabilities play a bigger role in the high‐tech electronics sector than in other manufacturing and play a limited role in nonmanufacturing.

Date: 2025
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