The Impact of Automation on Employment in a Small Open Economy - A Panel Study of Manufacturing Industries -

Many concerns that new technology and computerization would destroy a significant proportion of middle class jobs. This study examines the impact of automation on manufacturing jobs in a small open economy. Using a firm level panel data from South Korean manufacturing industry, this study investigates how computerization changes labor demand in a small open economy. The empirical analysis reveals that there is a negative relationship between automation and employment. In other words, the demand for routine jobs which are easily replaceable by computer capital tends to decrease due to technological development. However, the negative relationship is smaller in major export industries even with an increasing trend of automation. As such, this study suggests that the negative effect of automation on employment could be offset by the level of trade concentration of each industry in a small open economy.