Global Value Chains, the Rise of the Robots and Human Capital

Abstract

This essay examines whether robots will lead to the reshoring of activity from low-wage countries to rich countries, leading to a revival of manufacturing in rich countries. I argue that reshoring will not lead to an employment boom in rich countries, because the brilliant robots are a capital-biased technology, and as such, they potentially replace smart people. As a result, the skill premium – the wage discrepancy between a university graduate and a high school graduate – is declining in Europe. I argue further that the expansion of higher education has been too aggressive in light of the capital bias of digital technology.