Automation, firm employment and skill upgrading: firm-level evidence from China

Abstract

ABSTRACT The present empirical study investigated the impacts of automation technology on employment at the firm level in Dongguan, China. Results of propensity score matching (PSM) and difference-in-difference (DID) modelling show that automation technology increases the total employment as well as employment associated with workers at all skill levels of firms, indicating that the productivity effect is stronger than the displacement effect in manufacturing firms. Furthermore, automation technology has led to the skill upgrading of employment composition, with the proportion of high-skilled labour increasing and low-skilled labour decreasing. Moreover, automation can increase labour turnover in some PSM scenarios but reduce local labour share. Automation technology also has a lasting effect on employment size and local labour share, while its impact on employment skill composition lasts only three years. In addition, automation technology substantially affects the employment composition of labour-intensive, foreign-invested firms and firms older than six years.