Robots,Labor Substitution And Foreign Direct Investment

In recent decades,foreign direct investment has developed rapidly,and manufacturing enterprises in developed countries have outsourced production tasks to countries with low labor costs,such as China,Vietnam,Mexico and other developing countries in order to save costs and improve profitability.However,robots can replace low-skilled labor to complete production work,reduce FDI outflows from labor-intensive industries,and change the decision and orientation of FDI with the rapid development of robotics.The stock of FDI represents past investment decisions,while the flow FDI better reflects the impact of robots on FDI because this paper selects FDI flow data as the explanatory variable.The development of artificial intelligence can change the decision of the host country whether to make FDI,and at the same time,it can also affect the orientation of FDI.Firstly,this paper based on both domestic and foreign literature,systematically analyzes the theoretical production model of robots,the studies of robots on the labor market,and FDI motivation and location selection factors.Then we build a theoretical mechanism and hypothesis of robots influence foreign direct investment through capital deepening,wage and human capital.This paper builds a multiple fixed-effect model to analyze the effect of robots on foreign direct investment from the viewpoint of labor substitution.Secondly,this paper uses the matching data sets at the national level such as industrial robot data,PWT database,WGI database and WDI database from 2000 to 2019.And we construct multiple fixed-effect models for empirical analysis,and find the robot penetration lagging period has a significant promoting effect on FDI.At the same time,the conclusion of benchmark regression still holds after a series of robustness tests using endogenous tests,considering the impact of the international financial crisis in 2008,bilateral tail shrinkage,excluding samples from Japan and Russia,and capturing the influence of nonlinear factors.In the heterogeneity analysis,robots have a significant positive effect on middle and high income countries and inhibitory effect on low-income countries.In different periods of the demographic dividend,the impact of robots on foreign direct investment is also different.In addition,this paper further expands the mechanism of robot on FDI.In terms of intermediary effect,the application of robots has promoted foreign direct investment by promoting capital deepening,reducing wage levels,and increasing the proportion of high-skilled labor.Finally,based on the above empirical analysis results,this paper puts forward corresponding policy recommendations for different income countries.From the perspective of labor substitution,this paper expands the influence mechanism of robots on foreign direct investment,and provides rich empirical test results,which is helpful for countries to seize opportunities,attract foreign direct investment and promote further economic development in the period of rapid development of robots.