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Robots, reshoring, and the lot of low-skilled workers

Astrid Krenz, Klaus Prettner () and Holger Strulik ()

No 351, Center for European, Governance and Economic Development Research Discussion Papers from University of Goettingen, Department of Economics

Abstract: We propose a theoretical framework to analyze the offshoring and reshoring decisions of firms in the age of automation. Our theory suggests that increasing productivity in automation leads to a relocation of previously offshored production back to the home economy but without improving low-skilled wages and without creating jobs for low-skilled workers. Since it leads also to increasing wages for high-skilled workers, automation induced reshoring is associated with an increasing skill premium and increasing inequality. Using a new measure of reshoring activity and data from the world input outputtable, we find evidence for a positive association between reshoring and the degree of automation. On average, within manufacturing sectors, an increase by one robot per 1000 workers is associated with a 3.5% increase of reshoring activity. We also provide evidence that reshoring is positively associated with wages and employment for high-skilled labor but not for low-skilled labor.

Keywords: Automation; Reshoring; Employment; Wages; Inequality; Tariffs (search for similar items in EconPapers)
JEL-codes: F13 F62 J31 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lma, nep-pke and nep-tid
Date: 2018
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