No abstract

Unlike past technological innovations, automation of production by robots and artificial intelligence has been applied to replace all factors of production at a stunning pace. With a rapid progress in aging of the labor force, together with the ongoing automation-driven factor replacement, an empirical analysis of their uncertain impacts on economy is called for. Thus, despite the limited available information, we attempt to empirically analyze the relationship between production automation and economic growth in South Korea and suggest policy implications. We first compare the production automation in South Korea vis-à-vis the world by focusing on robot market sales. Our empirical analysis shows that the growth in the world’s robot sales is driven primarily by the service robot sector, whereas South Korea focuses on the production robots. In our analysis of its implications on economic growth, we find that proxies for production automation exert a positive impact on labor productivity as measured by the real GDP per capita, while the aging of labor force has a negative effect. Moreover, we find that an increased adoption of production automation amidst the progress of labor force aging offsets the negative impacts emanating from the latter, and improves labor productivity. Our findings militate in favor of the benevolent effects of the government policies advocating the “robotization” on sustainable economic growth in the era of declining fertility and labor force aging.