Search

There are growing concerns that automation technology may have far-reaching implications for development, by restructuring global value chains and substituting workers. This paper investigates how domestic and foreign automation impact a resource-rich emerging economy. The empirical analysis builds on a Ricardian model of trade and a shift-share approach. Differences in regional industrial compositions are used to translate domestic industry-level robot adoption to local labor markets in Brazil. Differential trade and inter-sectoral input–output linkages between a foreign industry and regions in Brazil are leveraged to construct a measure of exposure to foreign automation. Instrumental variables account for endogeneity in robot adoption. Larger exposure to foreign automation is found to decrease the share of manufacturing employment and increase the share of employment in the mining sector. These shifts are driven by changes in the demand for export goods from local labor markets. Domestic automation benefits higher skilled and female workers. The findings suggest that foreign automation may contribute to "premature deindustrialization" in emerging economies. • This study examines the effects of automation technology adoption by domestic and trade-partner industries on employment in 557 regions of Brazil. • The empirical analysis is grounded on a Ricardian model of trade, and instrumental variables account for endogeneity in robot adoption. • Automation in trade-partner countries reduces the employment share in manufacturing, while increasing employment shares in the mining sector. • The same pattern is found for sectoral and regional exports, suggesting that shifts in the demand for export goods are causing employment changes. • Automation within Brazil increases the ratio of female and higher-skilled workers, indicating skill complementary with the robot technology. [ABSTRACT FROM AUTHOR]