Automation-induced reshoring and potential implications for developing economies

This paper analyses the potential effect of automation on the global portfolio of trade specialization and income distribution based on the principle of comparative advantage, employed in an extension of Duchin's World Trade Model to include non-tradable sectors. Through a futuristic scenario-based analysis within the global economic context and using data from the World Input–Output Database and the International Assessment of Adult Competencies (PIAAC), we find that developing countries, particularly in lower-income Asia (including China, India, and Indonesia) are likely to be the most adversely affected by reshoring induced by automation adoption, whereas advanced economies benefit at their expense. The manufacturing sector in the developing countries is the most vulnerable to automation-driven reshoring.