Automation in an Open, Catching-up Economy : Aggregate and Microeconometric Evidence

Using the universe of firms in Estonia, we study the implications of imports-led and FDI- facilitated automation for productivity and factor shares of tasks and value-added. First, in contrast to the findings for developed economies, we find that the aggregate labour share of value-added for automation-adopting firms is higher than that for non-adopters and has grown, among others, through the reallocation of economic activities towards adopting firms. Second, the aggregate total factor productivity of the adopters concurrently grew faster than that of the non-adopters. Third, from the micro-level study, we find that the estimated labour share of tasks has declined over time among the adopting firms and is lowest in firms that frequently automate, where the frequency of automation provides rich information on firm automation characteristics. The study emphasizes international spillovers and the creation of productive new jobs by multinational adopters among the reasons for the increase in the labour share of value-added for adopters, even as their labour share of tasks declined. Fourth, the productivity impact of automation is heterogeneous: (a) firms that automate regularly, (b) multinational adopters, and (c) firms that realize complementarities between automation and innovative management practices are among the most productive adopters. The latter establishes that the innovative management practices instituted by adopters are those that help discover and facilitate complementarities between automation and human labour