Conference Paper
The Impact of Minimum Wage Shock on Robot Adaption in Turkey
No.
ERF30_88
Publisher
ERF
Date
March, 2024
In recent years, the use of industrial robots has witnessed a significant surge. While the fact that primary driver behind this surge is labor costs is widely acknowledged, there is a little attention on how cost-related shocks influence the decision to integrate robots within a firm. This paper examines how manufacturing firms in Turkey respond to a sudden 33.5% increase in the minimum wage in 2016 concerning their decisions to import robots. Using administrative employer-employee data, along with firm-level trade and balance sheet data, and employing a difference-in-differences approach with continuous treatment, the study finds that the minimum wage shock does not significantly impact robot adoption. However, this finding is contingent on firm size. Medium-sized firms exhibit a positive and significant propensity to adopt robots, with this effect being more pronounced for large firms compared to their smaller counterparts. Quantitatively, a one-point increase in the share of minimum wage employment in total employment corresponds to a 0.4% and 2.4% increase in the probability of importing robots for medium and large firms, respectively. These results hold robustly across different definitions of robot adoption. Notably, these firms display a tendency to augment their existing robotic equipment when confronted with a minimum wage shock.
Authors
Yusuf Emre Akgündüz
Faculty Member, Faculty of Arts and Social...
Authors
Uğur Aytun
Assistant Professor, Kutahya Dumlupinar University
Research Fellows
Seyit Mümin Cilasun
Professor of Economics, TED University