Robots and Firms

Marcel Smolka, Michael Koch, Ilya Manuylov (December 2020)

Forthcoming in Economic Journal

We study the microeconomic implications of robot adoption using a rich panel data-set of Spanish manufacturing firms over a 27-year period (1990-2016). We provide causal evidence on two central questions: (1) Which firm characteristics prompt firms to adopt robots? (2) What is the impact of robots on adopting firms relative to non-adopting firms? To address these questions, we look at our data through the lens of recent attempts in the literature to formalize the implications of robot technology. As for the first question, we establish robust evidence for positive selection, i.e., ex-ante better performing firms (measured through output and labour productivity) are more likely to adopt robots. On the other hand, conditional on size, ex-ante more skill-intensive firms are less likely to do so. As for the second question, we find that robot adoption generates substantial output gains in the vicinity of 20-25% within four years, reduces the labour cost share by 5-7%-points, and leads to net job creation at a rate of 10%. These results are robust to controlling for non-random selection into robot adoption through a difference-in-differences approach combined with a propensity score reweighting estimator. To further validate these results, we also offer structural estimates of total factor productivity (TFP) where robot technology enters the (endogenous) productivity process of firms. The results demonstrate a positive causal effect of robots on productivity, as well as a complementarity between robots and exporting in boosting productivity.

The paper can be found here.

Productivity and Firm Boundaries

Marcel Smolka, Wilhelm Kohler (January 2021)

Accepted at European Economic Review

We use property rights theory to study the effect of productivity on the trade-off between vertical integration and outsourcing at the firm-level. We develop a sharp empirical prediction that is robust across a range of property rights models, holding for single and multiple non-contractible inputs; any fixed cost difference between integration and outsourcing; and regardless of whether production is sequential or simultaneous in nature. Our prediction highlights a hitherto neglected ambiguity of the productivity effect that pushes firms towards integration in headquarter-intensive industries and towards outsourcing in supplier-intensive industries. We find considerable support for this prediction in Spanish firm-level data.

The paper can be found here.

Firm Exports, Foreign Ownership, and the Global Financial Crisis

Marcel Smolka, Peter S. Eppinger (March 2021)

The exceptional export performance of foreign-owned firms is a well-established stylized fact, but the underlying mechanism is not yet fully understood. In this paper, we provide theory and empirical evidence demonstrating that ownership differences in access to finance provide an explanation for this fact. We develop a theoretical model of international trade featuring firm heterogeneity and credit market frictions in which foreign-owned firms can access foreign capital markets via their multinational parents. The model predicts a financial advantage of foreign ownership for exporting that gains importance as credit conditions deteriorate. To empirically identify this effect, we estimate a triple differences model using rich micro data from Spain that exploits the global financial crisis as an exogenous shock to credit supply. We find that foreign ownership significantly stabilized firm exports when liquidity dried out in the crisis, in particular among small and financially vulnerable firms.

The paper can be found here.

The Economics of Processing Trade

Marcel Smolka and Boris Georgiev

[work in progress]