During the last few decades, manufacturers all over the world have outsourced production to countries with lower labor costs. This shifting production of labor-intensive goods and tasks to countries with lower labor costs in a pattern that then reproduces itself is often described as the “flying geese” paradigm.
Today, however, there is growing concern that robotization in high-income countries will challenge this shifting international division of labor.
But is there another dimension of automation that could in fact be a boon to Europe?
If labor is becoming a smaller share of costs and high-quality infrastructure, and access to skilled technicians and close links with suppliers relatively more important determinants, then Europe should stand to gain from the latest waves of technology.
This discussion will focus on the impact of automation on offshoring and how patterns of automation are affecting greenfield foreign direct investment (FDI) decisions, a forward-looking indicator of where production is expected to look at the following three questions:
First, as a leading center of global value chains – and leader in the production of robots – how much are European manufacturing firms changing their investments abroad as they automate?
Second, what are the implications within Europe – will reshoring help or hinder convergence within Europe?
Third, what are the implications for Europe’s trading partners in developing countries?
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Related Reading
Have Robots Grounded the Flying Geese? Evidence from Greenfield FDI in Manufacturing (Policy Research Working Paper)
Trouble in the Making? The Future of Manufacturing-Led Development (Publication)
