Publication:
Is Automation Labor-Displacing in the Developing Countries, Too? Robots, Polarization, and Jobs

Loading...
Thumbnail Image
Files in English
English PDF (445.85 KB)
2,032 downloads
English Text (88.91 KB)
87 downloads
Date
2019-07-25
ISSN
Published
2019-07-25
Author(s)
Molina, Carlos
Editor(s)
Abstract
This paper uses global census data to examine whether the labor market polarization and labor-displacing automation documented in the advanced countries appears in the developing world. While confirming both effects for the former, it finds little evidence for either in developing countries. In particular,the critical category corresponding to manufacturing worker, operators and assemblers has increased in absolute terms and as a share of the labor force. The paper then uses data on robot usage to explore its impact on the relative employment evolution in each sample controlling for Chinese import penetration. Trade competition appears largely irrelevant in both cases. Robots, however, are displacing in the advanced countries, explaining 25-50 percent of the job loss in manufacturing. However, they likely crowd in operators and assemblers in developing countries. This is likely due to off-shoring that combines robots with new operators in FDI destination countries which may, for the present, offset any displacement effect. Some evidence is found, however, for incipient polarization in Mexico and Brazil.
Link to Data Set
Citation
Molina, Carlos; Maloney, William F.. 2019. Is Automation Labor-Displacing in the Developing Countries, Too? Robots, Polarization, and Jobs. © World Bank. http://hdl.handle.net/10986/33301 License: CC BY 3.0 IGO.
Associated URLs
Associated content
Report Series
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections

Related items

Showing items related by metadata.

  • Publication
    Are Automation and Trade Polarizing Developing Country Labor Markets, Too?
    (World Bank, Washington, DC, 2016-12) Molina, Carlos; Maloney, William F.
    The automation and out-sourcing of routine, codifiable tasks are seen as driving polarization in labor markets in high-income countries. This paper first offers several explanations for why developing countries might show differing dynamics, at least for the present. Census data then confirms this, showing on average no evidence of polarization in developing countries. However, incipient polarization in a few countries as well as major drives to automate in some large, labor intensive producers suggests this may not remain the case. This raises concerns first about the impact on equity within those countries, but second the possibility that the traditional flying geese pattern" -- whereby low skilled jobs are progressively off-shored to poorer and poorer countries -- may be short circuited.
  • Publication
    Automation and Manufacturing Performance in a Developing Country
    (World Bank, Washington, DC, 2021-05) Cali, Massimiliano; Presidente, Giorgio
    This paper provides novel evidence on the economic impact of industrial automation in a large developing economy. It combines labor force survey and manufacturing plant-level data from Indonesia over 2008–15, when the country experienced a rapid increase in imports of robots. The findings show a positive impact of robots on various measures of plants’ performance and integration into global value chains. In contrast to existing evidence on advanced and emerging economies, these plant-level impacts result in an increase in manufacturing and services employment at the local level. Such employment effects are consistent with evidence of positive employment spillovers from downstream robot-adopting plants, which help extend the benefits of automation to non-adopting plants. The spillover effects may provide a rationale to incentivize manufacturing firms to adopt industrial robots. The results also suggest that the gains from automation are not equally shared: adoption of robots is associated with a reduction in the labor share in value added and an increase in skill wage premia.
  • Publication
    Labor Market Dynamics in Developing Countries : Comparative Analysis using Continuous Time Markov Processes
    (World Bank, Washington, DC, 2005-04) Bosch, Mariano; Maloney, William
    The authors study the dynamics of three developing country labor markets using recent advances in the estimation of continuous time Markov processes. They first examine the flows of workers among five states: three types of paid labor, unemployment, and out of the labor force. The authors find a high degree of commonality in patterns of worker flows among the three countries and attempt to compare the flexibility of the markets by examining an index of overall mobility. Second, they seek to establish whether the issues of advanced country labor markets apply to developing country markets or whether the latter constitute a different phylum. Paralleling the mainstream literature on the role of being out of the labor force as discouraged unemployment, the authors then identify some common stylized facts about the role of the informal self-employed and salaried sectors and to what degree they serve as a holding pattern versus a desirable alternative to formal sector work. In the process, the authors identify very strong differences in mobility patterns between men and women and attempt to shed some light on whether these differences arise from discrimination or perhaps instead the constraints imposed by household responsibilities. Finally, they study labor market adjustment across the business cycle in Mexico and identify patterns of job creation and destruction among the three paid sectors and confirm the mainstream view of the role of out of the labor force as a procyclical phenomenon.
  • Publication
    Does Automation in Rich Countries Hurt Developing Ones? Evidence from the U.S. and Mexico
    (World Bank, Washington, DC, 2019-02) Artuc, Erhan; Christiaensen, Luc; Winkler, Hernan
    Following a couple of decades of offshoring, the fear today is of reshoring. Using administrative data on Mexican exports by municipality, sector and destination from 2004 to 2014, this paper investigates how local labor markets in Mexico that are more exposed to automation in the U.S. through trade fared in exports and employment outcomes. The results show that an increase of one robot per thousand workers in the U.S. -- about twice the increase observed between 2004-2014 -- lowers growth in exports per worker from Mexico to the U.S. by 6.7 percent. Higher exposure to U.S. automation did not affect wage employment, nor manufacturing wage employment overall. Yet, the latter is the result of two counteracting forces. Exposure to U.S. automation reduced manufacturing wage employment in areas where occupations were initially more susceptible to being automated; but exposure increased manufacturing wage employment in other areas. Finally, the analysis also finds negative impacts of exposure to local automation on local labor market outcomes.
  • Publication
    Chilean Growth through East Asian Eyes
    (World Bank, Washington, DC, 2008) Kharas, Homi; Leipziger, Danny; Maloney, William; Thillainathan, R.; Hesse, Heiko
    Chile could well have space to increase its growth potential by 2 percentage points of Gross Domestic Product (GDP) per year. To do this, it would need to pay more attention to new sources of growth in natural resources, manufacturing, and services. In an increasingly globalized world, first-mover advantages have become more numerous and larger. Chile risks losing out, as a few recent high-profile cases suggest. Chile's total factor productivity growth can be raised by driving within-firm technological change closer to the global best-practice frontier more rapidly, especially in manufacturing. This would encourage the diversification of exports and boost Chile's supply response to global demand changes. Chile confronts obstacles in its processes of innovation, human capital accumulation, and investment. To overcome them, deep institutional changes are needed to develop a national innovation system, stronger and more equitable educational achievement, more flexible labor markets, and focused public investments that crowd in private business. Such an inclusive growth strategy is likely to yield better social outcomes than a strategy that attempts to confront social inequities head-on through more equitable access to public services without paying adequate attention to the demand for labor and generation of income. Chile could also try a new policy towards innovation, but it would need to be bolder in terms of the institutional design to maximize the chances of success.

Users also downloaded

Showing related downloaded files

  • Publication
    Global Economic Prospects, January 2025
    (Washington, DC: World Bank, 2025-01-16) World Bank
    Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.
  • Publication
    Poverty and Shared Prosperity 2016
    (Washington, DC: World Bank, 2016-10-02) World Bank Group
    Poverty and Shared Prosperity 2016 is the first of an annual flagship report that will inform a global audience comprising development practitioners, policy makers, researchers, advocates, and citizens in general with the latest and most accurate estimates on trends in global poverty and shared prosperity. This edition will also document trends in inequality and identify recent country experiences that have been successful in reducing inequalities, provide key lessons from those experiences, and synthesize the rigorous evidence on public policies that can shift inequality in a way that bolsters poverty reduction and shared prosperity in a sustainable manner. Specifically, the report will address the following questions: • What is the latest evidence on the levels and evolution of extreme poverty and shared prosperity? • Which countries and regions have been more successful in terms of progress toward the twin goals and which are lagging behind? • What does the global context of lower economic growth mean for achieving the twin goals? • How can inequality reduction contribute to achieving the twin goals? • What does the evidence show concerning global and between- and within-country inequality trends? • Which interventions and countries have used the most innovative approaches to achieving the twin goals through reductions in inequality? The report will make four main contributions. First, it will present the most recent numbers on poverty, shared prosperity, and inequality. Second, it will stress the importance of inequality reduction in ending poverty and boosting shared prosperity by 2030 in a context of weaker growth. Third, it will highlight the diversity of within-country inequality reduction experiences and will synthesize experiences of successful countries and policies, addressing the roots of inequality without compromising economic growth. In doing so, the report will shatter some myths and sharpen our knowledge of what works in reducing inequalities. Finally, it will also advocate for the need to expand and improve data collection—for example, data availability, comparability, and quality—and rigorous evidence on inequality impacts in order to deliver high-quality poverty and shared prosperity monitoring.
  • Publication
    Global Economic Prospects, June 2025
    (Washington, DC: World Bank, 2025-06-10) World Bank
    The global economy is facing another substantial headwind, emanating largely from an increase in trade tensions and heightened global policy uncertainty. For emerging market and developing economies (EMDEs), the ability to boost job creation and reduce extreme poverty has declined. Key downside risks include a further escalation of trade barriers and continued policy uncertainty. These challenges are exacerbated by subdued foreign direct investment into EMDEs. Global cooperation is needed to restore a more stable international trade environment and scale up support for vulnerable countries grappling with conflict, debt burdens, and climate change. Domestic policy action is also critical to contain inflation risks and strengthen fiscal resilience. To accelerate job creation and long-term growth, structural reforms must focus on raising institutional quality, attracting private investment, and strengthening human capital and labor markets. Countries in fragile and conflict situations face daunting development challenges that will require tailored domestic policy reforms and well-coordinated multilateral support.
  • Publication
    Poverty and Shared Prosperity 2020
    (Washington, DC: World Bank, 2020-10-07) World Bank
    Previous Poverty and Shared Prosperity Reports have conveyed the difficult message that the world is not on track to meet the global goal of reducing extreme poverty to 3 percent by 2030. This edition brings the unwelcome news that COVID-19, along with conflict and climate change, has not merely slowed global poverty reduction but reversed it for first time in over twenty years. With COVID-19 predicted to push up to 100 million additional people into extreme poverty in 2020, trends in global poverty rates will be set back at least three years over the next decade. Today, 40 percent of the global poor live in fragile or conflict-affected situations, a share that could reach two-thirds by 2030. Multiple effects of climate change could drive an estimated 65 to 129 million people into poverty in the same period. “Reversing the reversal” will require responding effectively to COVID-19, conflict, and climate change while not losing focus on the challenges that most poor people continue to face most of the time. Though these are distinctive types of challenges, there is much to be learned from the initial response to COVID-19 that has broader implications for development policy and practice, just as decades of addressing more familiar development challenges yield insights that can inform responses to today’s unfamiliar but daunting ones. Solving novel problems requires rapid learning, open cooperation, and strategic coordination by everyone: from political leaders and scientists to practitioners and citizens.
  • Publication
    Poverty and Shared Prosperity 2018
    (Washington, DC: World Bank, 2018-10-17) World Bank
    The World Bank Group has two overarching goals: End extreme poverty by 2030 and promote shared prosperity by boosting the incomes of the bottom 40 percent of the population in each economy. As this year’s Poverty and Shared Prosperity report documents, the world continues to make progress toward these goals. In 2015, approximately one-tenth of the world’s population lived in extreme poverty, and the incomes of the bottom 40 percent rose in 77 percent of economies studied. But success cannot be taken for granted. Poverty remains high in Sub- Saharan Africa, as well as in fragile and conflict-affected states. At the same time, most of the world’s poor now live in middle-income countries, which tend to have higher national poverty lines. This year’s report tracks poverty comparisons at two higher poverty thresholds—$3.20 and $5.50 per day—which are typical of standards in lower- and upper-middle-income countries. In addition, the report introduces a societal poverty line based on each economy’s median income or consumption. Poverty and Shared Prosperity 2018: Piecing Together the Poverty Puzzle also recognizes that poverty is not only about income and consumption—and it introduces a multidimensional poverty measure that adds other factors, such as access to education, electricity, drinking water, and sanitation. It also explores how inequality within households could affect the global profile of the poor. All these additional pieces enrich our understanding of the poverty puzzle, bringing us closer to solving it. For more information, please visit worldbank.org/PSP