Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/326868 
Year of Publication: 
2023
Series/Report no.: 
UNU-MERIT Working Papers No. 2023-018
Publisher: 
United Nations University (UNU), Maastricht Economic and Social Research Institute on Innovation and Technology (UNU-MERIT), Maastricht
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.
Subjects: 
Reshoring
Automation
Specialization
Developing Countries
Advanced Countries
JEL: 
O33
D33
E25
F14
F17
F47
J21
Creative Commons License: 
cc-by-nc-sa Logo
Document Type: 
Working Paper

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