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Effects of Industry 4.0 on reshoring investments - Hungarian experiences

Andrea Elteto ()
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Andrea Elteto: Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences

No 251, IWE Working Papers from Institute for World Economics - Centre for Economic and Regional Studies

Abstract: After the 2008 crisis, the topic of reshoring previously outsourced production was raised in the EU and the USA, in parallel to reindustrialization and competitiveness discourses. This paper clarifies the definition of reshoring, backshoring and nearshoring, while enumerating the possible motivations for them (eg. higher-than-expected labour or transport costs, strategic decision-making, insufficient product quality). Automation and robotization (parts of the ‘Industry 4.0’ concept) can provide a push in the global production chain for various forms of ‘shoring’. This can be highly relevant for CEE countries, given their high-levels of integration into global production chains. Advanced robotics increasingly allows the substitution of labour, thus a wave of reshoring can take place from low-cost labour-intensive countries to developed countries that previously exported capital and technology. This paper addresses reshoring impacting Hungary (backshoring from Hungary and nearshoring to Hungary from Far-Eastern countries). Apart from theoretical writings, little work has been done on the empirics of reshoring and its correlation with robotization. This paper summarises these empirical studies in a targeted literature review, while recent trends are mapped based on press information and interviews. The major conclusions are that backshoring from Hungary because of Industry 4.0 is practically non-existent, but examples of nearshoring to Hungary can be found. Certain country-specific characteristics (e.g. labour shortages, legal instability, tax policy) contribute to investment and automation decisions of foreign producers. Moreover, domestic SMEs are generally not prepared to the introduction of Industry 4.0 technologies in Hungary in comparison to the foreign affiliates.

Keywords: reshoring; industry 4.0; Hungary; automation; nearshoring (search for similar items in EconPapers)
JEL-codes: F23 F6 M11 M15 O33 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2019-04
New Economics Papers: this item is included in nep-int and nep-tra
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