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What drives investment in automation technologies? This paper documents a positive relationship between labor-friendly institutions and investment in in- dustrial robots in a sample of developing and advanced economies. Institutions explain a substantial share of cross-country variation in automation. The relation- ship between institutions and robots is stronger in sunk cost-intensive industries, where producers are vulnerable to holdup. The result suggests that one reason for producers to invest in automation is to thwart rent appropriation by labor. As a consequence, policies aimed at supporting workers' welfare by increasing their bargaining power might actually reduce their employment opportunities.

This paper studies how productivity and markups respond to non-tariff measures. The analysis uses a novel time-varying data set on all non-tariff measures applied to imported products by Indonesia. Price and quantity information is used to disentangle the impact of non-tariff measures on plants’ technical efficiency and markups. The findings show that on average, non-tariff measures generate fewer distortions than import tariffs do. However, while specific non-tariff measures increase the quality of the products on which they are applied, others act as barriers to trade similar to import tariffs. These results suggest that to gauge their impacts and guide policy making, non-tariff measures should not be bundled together in empirical analyses.

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.

This paper uses cross-country micro-aggregated data on firm dynamics and productivity from the ECB CompNet database to provide empirical evidence on factor reallocation in the European Union (EU). The analysis finds that reallocation is towards more productive firms although the magnitude varies across countries and over time. Variation in reallocation is related to structural differences in firm size distribution across countries as well as to variation in labor and product market institutions. Productivity-enhancing reallocation generally rises in downturns but, similar to findings for the US, it did not pick up in the Great Recession. The sharp drop in exports and tightness in credit markets are seen to provide a partial explanation for this lack of a silver lining.