Including robots in future competitiveness ranking

On September 26, we are launching the third edition of the IMD World Digital Competitiveness Ranking. It assesses an economy’s ability to adapt and explore digital technologies that transform business models, government practices and society in general.

To evaluate an economy, WDCR examines three factors: knowledge, which measures the capacity to understand and learn the new technologies; technology, which evaluates the competence of an economy to develop new digital innovations; and future readiness, which assesses the preparedness for the coming developments.

This year, two new variables are introduced in the calculation of the WDCR, both related to robotics. Robots, that is, programmable machines that perform different tasks, are part of the new technologies introduced in different areas of our lives. In the context of the WDCR, we are incorporating two series: “industrial robot” that measures the total number of robots in operation and specifically “robots in education and R&D” worldwide. The data is provided by the International Federation of Robotics.

As it is expected, the robots used are unequally distributed worldwide. Five countries employ the highest share of robots that accounts for almost 75 percent of the total number of robots worldwide. These countries, in order of strength, are: China, Japan, South Korea, USA and Germany.

In recent years, there has been significant research on what the effect of automation and robots is and will be in an economy. Of particular importance is the question about the future of labor. Does the introduction of robots specifically, and automation in general, result in a decline of the need for workers? Or will the trend be that with the advent of robots, new tasks will be identified and introduced and, therefore, the implications will be less severe than thought?

Irrespective of the effect on the labor markets, the introduction of robotics is expected to impact productivity. Our study captures the association between the number of robots employed and the change in the productivity.

While China enjoys a substantial increase in the robots employed, this is not the case for Japan. In fact, Japan had realized a small decrease in the number of robots employed between 2011 and 2017. Interestingly, there does not seem to be a strong and consistent relationship with the productivity data. We observe, for instance, that the Japanese and Chinese productivity follow an opposite evolution.

The underlying important issue is the unequal distribution of this form of automation. The first-mover advantage that the five economies have in the area of robotics compared with the rest of the economies is impressive in terms of experience and learning-by-doing.

Undoubtedly, it provides a substantial advantage in the application of new technologies. Will then this result in an increased digital inequality?

Christos Cabolis is Adjunct Professor of Economics and Competitiveness at IMD. Copyright: IMD.