ABSTRACT
Using merged data on Indonesian manufacturing firms, raw materials and products, and exports and imports at the firm–product level, we examine how automation is associated with firm productivity, quality, and employment. We use a firm’s direct imports of automation equipment as a proxy for automation. Our cross-sectional analysis finds that firms that have imported automation equipment (automators) are more productive than other firms. Interestingly, automators tend to have lower labor shares, yet pay relatively higher wages. Using a long-difference specification, we find that automators experience larger increases in output, numbers of production workers, and export shares, and they produce higher-quality goods. Last, to rationalize our empirical results, we propose a simple framework to characterize firms’ decisions about investing in automation equipment.
