Air pollution and firms' robot adoption: Evidence from China

Studies exploring the determinants of robot adoption are scarce, and majority of the literature attributes robot adoption to economic and social factors related to labor costs, neglecting the impact of air pollution as an environmental factor. This study examines the causal effect of air pollution on robot adoption by Chinese firms, using imported robot data from 2000 to 2012. We employ annual thermal inversion days as an instrument to perform a 2SLS estimation and find that air pollution positively affects firms' robot adoption in terms of probability and quantity. Reduced labor productivity and raised labor costs drive the documented impacts. Crosssectionally, the observed effect is only significant for non-state-owned firms, firms in industries with more automation opportunities, and firms in areas with greater financial accessibility. Further analysis suggests a positive relationship between air pollution and firms' automation levels.