Robots and export quality

Abstract

Robots are becoming a key part of manufacturing in developed and emerging economies. This paper examines how automation can affect international trade through quality upgrading. The effects of robot use on export quality are estimated, by combining cross-country and cross-industry data on industrial robots with detailed Harmonized System 10-digit trade data. Robot diffusion in (preexisting) foreign customers is used as an instrumental variable to predict robot adoption in the home country-industry. The findings show that robot diffusion increases the quality of exported products. Quality improvements are predominantly driven by upgrading of (initially) lower-quality exports of developed and developing countries. Since developing countries tend to export lower quality goods, we find stronger effects overall for developing economies. The paper also finds some differences in the type of robots – sophisticated or more basic – are associated with quality gains in developing and developed economies.