Fact of the Week: In Japan, a 1 Percent Increase in Robot Adoption Due to Lower Prices Leads to a 0.28 Percent Increase in Employment

Source: Daisuke Adachi, Daiji Kawaguchi, and Yukiko Saito, “Robots and Employment: Evidence from Japan, 1978 – 2017,” Research Institute of Economy, Trade and Industry, May, 2020.

Commentary: Automation’s effect on labor demand has long been seen by the public as negative. Japanese researchers challenged this perception when they examined robots’ impact on employment across a range of Japanese industries from 1978 to 2017. The authors found that at the industry-level, robots and labor are complements, and that if a 1 percent drop in robot prices leads to a 1 percent increase in robot adoption, then employment would increase by 0.28 percent. The authors concluded that these results could be the product of strong domestic demand for robotics, as occurred in Japan due to its post-War labor shortage. High demand led to increases in robot adoption, and thus efficiency gains from increasing returns to scale, which mitigated more negative displacement effects found in other literature on automation and employment.