Robots and Trade Implications for Developing Countries

• Published in: Robots and AI pp. 232 - 274
• Main Authors: Artuc, Erhan, Bastos, Paulo, Copestake, Alexander, Rijkers, Bob
• Format: Book Chapter
• Language: English
• Published: United Kingdom Routledge 2023; Taylor & Francis Group
• Edition: 1
• Subjects: Scale Effect; Initial Gdp; EDD; South's Exports; Premature De-industrialization; FDI; Real Gdp; Chain Participation; Bilateral Trade Flows; Southern Exports; Middle Aged Workers; Common Language; MIIT; Complex Production Networks; Ricardian Model; Intermediate Inputs; Robotized Industry; Firm Level Data; EU KLEMS; Automatable Tasks; Ricardian Framework; Developing Countries; North South Trade; China's Subsidies; Substitution Effect
• ISBN: 9781032230665; 1032230665; 9781032230672; 1032230673
• DOI: 10.4324/9781003275534-8

In this chapter, we first use a Ricardian framework to examine the impact on developing countries of robotization in developed countries. Drawing on Artuc, Bastos and Rijkers (2018), in Section 2 we present theory and evidence indicating that robot adoption in the high-wage advanced economies promoted trade between developed and developing countries. We highlight that such adoption can ultimately benefit workers in developing countries, particularly through lower prices and increased demand for intermediate inputs. The impact of robotization is shown to depend on the initial degree of robotization. In Section 3, we extend this framework by adding China explicitly to the calibrated model, noting that its robot stock has expanded rapidly in recent years to become by far the world's largest (in absolute terms). We analyze the impact of China's subsidies for robotization, as described in Cheng et al. (2019), and find ambiguous effects on wages of Chinese workers depending on the size of the subsidy. Interestingly, as China increasingly subsidizes industrial robots, its pattern of comparative advantage becomes more similar to that of OECD countries, which reduces its total trade with them. The opposite conclusion applies to trade between China and developing countries.