Template-type: ReDif-Paper 1.0 Author-Name: Nii-Aponsah, Hubert Author-workplace-name: RS: GSBE other - not theme-related research, Mt Economic Research Inst on Innov/Techn Author-Name: Verspagen, Bart Author-workplace-name: RS: GSBE other - not theme-related research, Mt Economic Research Inst on Innov/Techn, RS: UNU-MERIT Theme 1 Author-Name: Mohnen, Pierre Author-workplace-name: RS: GSBE other - not theme-related research, QE Econometrics Title: Automation-induced reshoring and potential implications for developing economies Abstract: Technological progress in automation technologies, such as Artificial Intelligence (AI), is expected to impact production activities beyond the home country adopting them as countries interact within the global trade system. Firms tend to offshore production activities to other countries when it is more profitable to produce elsewhere than at home. The adoption of automation technologies reduces the cost of producing in the home country, making previous offshore locations relatively less attractive. From a global perspective, the altered cost structure induces reshoring: a reorganization of production activities back home or to other lower-cost locations. Developing economies, which previously served as low-cost locations, could be adversely impacted by experiencing a drop in the production of the affected sectors and goods. This paper analyses the potential effect of automation on the global portfolio of trade specialization based on the principle of comparative advantage, employed
in an extension of Duchin’s World Trade Model to include non-tradable sectors. Through scenario-based analyses within the global economic context and using data, primarily, from the World Input-Output Database (WIOD) and the International Assessment of Adult Competencies (PIAAC), we find that countries in lower-income Asia are likely to be the most adversely affected by reshoring induced by automation in advanced economies. Classification-JEL: o33,d33,e25,f14,f17,f47,j21 Series: UNU-MERIT Working Papers Creation-Date: 20230522 Number: 2023-018 File-URL: https://cris.maastrichtuniversity.nl/ws/files/139052268/wp2023_018.pdf File-Format: application/pdf File-Size: 751342 Handle: Repec:unm:unumer:2023018 DOI: