Smog‐Induced Automation: The Rise of Robots in Polluted Skies of China

ABSTRACT This paper examines the effect of air pollution on firms' adoption of industrial robots in China. Using matched firm‐level data from the China Industrial Enterprise Database and the China Customs Trade Database for 2000–2014, we measure robot adoption by firms' imports of industrial robots. To address endogeneity, we employ thermal inversion as an instrumental variable for air pollution. We find that air pollution significantly increases the probability of robot adoption, as well as the value and quantity of robots used by firms. Mechanism analyses suggest that this effect operates mainly through lower labor productivity, reduced regional labor supply, and weakened innovation capability. The effect is stronger for non–state‐owned enterprises, firms in regions with stricter environmental regulation, and firms in labor‐intensive industries. Overall, the findings provide firm‐level evidence that environmental shocks can accelerate automation and technological upgrading.