Have Robots Grounded the Flying Geese? Evidence from Greenfield FDI in Manufacturing
For decades, manufacturers around the world have outsourced production to countries with lower labor costs. However, there is a concern that robotization in high-income countries will challenge this shifting international division of labor known as...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/945231577418925587/Have-Robots-Grounded-the-Flying-Geese-Evidence-from-Greenfield-FDI-in-Manufacturing http://hdl.handle.net/10986/33105 |
| Summary: | For decades, manufacturers around the
world have outsourced production to countries with lower
labor costs. However, there is a concern that robotization
in high-income countries will challenge this shifting
international division of labor known as the "flying
geese" paradigm. Greenfield foreign direct investment
decisions constitute a forward-looking indicator of where
production is expected, rather than trade flows that reflect
past investment decisions. Exploiting differences across
countries and industries, the intensity of robot use in
high-income countries has a positive impact on foreign
direct investment growth from high-income countries to low-
and middle-income countries over 2004-15. Past a threshold,
however, increased robotization in high-income countries has
a negative impact on foreign direct investment growth. Only
3 percent of the sample exceeds the threshold level beyond
which further automation results in negative foreign direct
investment growth and is consistent with re-shoring. For
another 25 percent of the sample, the impact of robotization
on the growth of foreign direct investment is positive, but
at a rate that is declining. So, although these are early
warning signs, automation in high-income countries has
resulted in growing foreign direct investment for more than
two-thirds of the sample under consideration. Some geese
may be slowing, but for now, most continue to fly. |
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