The Impact of AI and Robot Technology on Firm Productivity and Employment

Author Name KIM YoungGak (Senshu University) / INUI Tomohiko (Gakushuin University)
Creation Date/NO. March 2021 21-J-009
Research Project East Asian Industrial Productivity
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This paper examines the effect of the development of AI and robot technology in a firm on its productivity and the number of employees. By matching the patent application data with firm data, we determined the application status of AI and robot technology in each firm. In addition, each patent application is weighted by the number of citations, and this value is regarded as an indicator of technological development in the firm. The results of the analysis are as follows.

The progress of AI technology in the firm leads to improve its firm total factor productivity (TFP). It was also found that the progress in AI technology has a negative impact on the number of employees in the manufacturing sector but has a positive impact on the number of employees in the service sector. It was confirmed that progress in robot technology also has the effect of boosting the productivity of the firm. As with AI technology progress, no significant impact was found on overall employment, while the introduction and increase in robotic technology significantly reduced the number of employees in the manufacturing and sales sectors. This may be because the increase in the number of employees in the service sector cancels out the negative impact on manufacturing and sales sectors employment. Our results are similar to those in Ni and Obashi (2021) and Adachi, Kawaguchi, and Saito (2020), the results show that robots and employment are complementary as a whole in Japan.

The progress in AI and robot technology brings about changes in firm domestic and overseas production systems. The technological progress related to AI and robots reduces the number of existing domestic manufacturing establishments, increases the probability of exit, and at the same time increases the creation of new manufacturing establishments, thereby improving the efficiency of resource allocation between business units within the firm. The progress in AI and robot technology enhances international competitiveness and thus promotes overseas production as a whole, but has a negative effect on the overseas affiliates' production activities in low-income countries.