Abstract:
Recent evidence suggests that automation technologies entail a trade-off between produc- tivity gains and employment losses for the economies that adopt them. This paper casts doubts on such trade-off in the context of a developing country. It shows significant productivity and employment gains from automation in Indonesian manufacturing during the years 2008-2015, a period of rapid increase in robot imports. Analysis based on manufacturing plant data provides evidence that the absence of this trade-off is due to diminishing productivity returns to robot adoption. As a result, the benefits from automation could be particularly large for countries at early stages of industrialisation, such as Indonesia. Suggestive evidence indicates these results could apply to developing countries more generally.