Robots on Sale: The Effect of Investment Promotion on Robot Adoption and Employment
We study the role of an investment promotion policy in adopting industrial robots and firm performances, notably employment. Combining the policy variation in the Tax Credit for Promoting Productivity-Enhancing Equipment Investment (TC-PPEI) in Japan and a newly collected Japanese firm-level longitudinal data on robot adoption, we find that the firms eligible for the TC-PPEI increased the adoption of robots. Our event-study analysis reveals that when firms adopt robots, they do not decrease the total number of workers but significantly increase it after 1-3 years of adoption event as well as sales. Our results suggest that adopting robots can be employment creating instead of destroying at the firm level.