Does Automation in Rich Countries Hurt Developing Ones?: Evidence from the U.S. And Mexico

Abstract

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.

Keywords: International Trade and Trade Rules, Labor Markets, Food & Beverage Industry, Textiles, Apparel & Leather Industry, Pulp & Paper Industry, Plastics & Rubber Industry, Common Carriers Industry, Construction Industry, Business Cycles and Stabilization Policies, General Manufacturing, Rural Labor Markets, Wages, Compensation & Benefits