DP14293 Globotics and development: When manufacturing is jobless and services are tradable

Author(s): Richard Baldwin, Rikard Forslid
Publication Date: January 2020
Keyword(s): Development, Digital Technology, Globotics
JEL(s): F1
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14293

Globalization and robotics (globotics) are transforming the world economy at an explosive pace. While much of the literature has focused on rich nations, the changes are quite likely to affect developing nations in important ways. The premise of the paper - which should be regarded as a thought-piece - is based on an extreme thought experiment. What does development look like when digitech has rendered manufacturing jobless and many services freely traded? Our conclusion is that the service-led development path may become the norm rather than the exception; think India, not China. Since success in the service sector is based on quite different factors than success in manufacturing, development strategies and mindsets may have to change. This is an optimistic conclusion since it suggests that developing nations can directly export the source of their comparative advantage - low-cost labor - without having first to make goods with that labor.