Adoption of Automation Technology and Labor Substitution

Author Name ADACHI Daisuke (Yale University) / KAINUMA Shuhei (University of Tokyo) / KAWAGUCHI Daiji (University of Tokyo) / SAITO Yukiko (Senior Fellow, RIET)
Creation Date/NO. May 2019 19-P-010
Research Project Dynamics of Inter-organizational Network and Firm Lifecycle
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The threat of reductions in labor demand caused by automation in the manufacturing sector attracts much interest. However, it is pointed out that total labor demand should not decrease because automation in the manufacturing sector is associated with the new demand for labor associated with maintenance inspection services and the increase in productivity is expected to cause new demand for services. An increased demand scenario and decreased demand scenario resulting from automation are both theoretically possible, so further empirical investigation is necessary regarding the implications of both scenarios. Using the data on the number of industrial robots provided by the International Federation of Robotics and labor data from the Basic Survey of Employment Structure, this paper analyses the relationship between the adoption of industrial robots in the manufacturing sector and the number of employees at the regional labor market level following Acemogle and Restrepo (2018a). We found that there is no clear relationship between the adoption of industrial robots and the total amount of labor, and that there is a significant, positive relationship with labor for the manufacturing sector, implying no labor substitution.