Reshoring, Automation, and Labor Markets Under Trade Uncertainty

Sylvain Leduc and Zheng Liu

No 2024-16, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We study the implications of trade uncertainty for reshoring, automation, and U.S. labor markets. Rising trade uncertainty creates incentive for firms to reduce exposures to foreign suppliers by moving production and distribution processes to domestic producers. However, we argue that reshoring does not necessarily bring jobs back to the home country or boost domestic wages, especially when firms have access to labor-substituting technologies such as automation. Automation improves labor productivity and facilitates reshoring, but it can also displace jobs. Furthermore, automation poses a threat that weakens the bargaining power of low-skilled workers in wage negotiations, depressing their wages and raising the skill premium and wage inequality. The model predictions are in line with industry-level empirical evidence.

Keywords: offshoring; reshoring; automation; robots; uncertainty; unemployment; wages; productivity (search for similar items in EconPapers)
JEL-codes: E24 F41 J64 O33 (search for similar items in EconPapers)
Pages: 39
Date: 2024-05-05
New Economics Papers: this item is included in nep-dge, nep-int, nep-lab and nep-tid
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DOI: 10.24148/wp2024-16

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