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Employment and Technological Innovation: Evidence from U.K. Manufacturing Firms
Abstract
This article uses British firm-level panel data on actual innovative activity drawn from different statistical sources to identify the effect of technical change on jobs. Previous work tends to find positive associations of proxies for technical change and employment but such studies suffer from various statistical drawbacks. In this study, even when one controls for fixed effects, dynamics, and endogeneity, innovations have a positive and significant effect on employment, which persists over several years. There seems to be little direct role for spillover effects from industry innovations or any role for industry wages or union power. Copyright 1997 by University of Chicago Press.
... The coefficient on innovation intensity (I ict ) can be either negative or positive, depending on whether the elasticity of substitution is smaller or greater than one. Finally, the negative effect of real wages (W_r ict ) and the positive effect of output (VA_cons ict ) on employment also reflect the first-order conditions from the CES production functionsand are in line with predictions form derived labour demand models (Chennells and Van Reenen, 2002;Van Reenen, 1997;Ugur et al., 2018). ...
... In the employment model (Eq. (5a)), I control for value added in 2015 prices (VA_cons) in accordance with predictions from the CES production functions and derived labour demand models (Chennells and Van Reenen, 2002;Van Reenen, 1997). In the labour share model (Eq. ...
... The effect of technological innovation on labour share is positive but small. This finding is consistent with widely reported evidence that technological innovation is associated with a small or moderate increase in labour share when the elasticity of substitution is greater than one (Van Reenen, 1997;Ripotto, 2001;Guerriero, 2012;Meng and Wang, 2021;O'Mahony et al., 2021;Chen et al., 2022). The effect of market power on labour share, however, is overwhelmingly adverse. ...
This paper takes issue with what I describe as a single focus on either innovation or market power as potential determinants of employment or labour share. Drawing on a constant elasticity of substitution (CES) production function and EU- KLEMS data on OECD industries, I demonstrate that the unifocal approach is not justified theoretically or empirically. I report that: (i) employment and labour share depends on both innovation and market power; (ii) market power's direct effects on both outcomes are always negative and large; (iii) innovation's direct effects are small and depend on the elasticity of substitution between capital and labour; and (iv) innovation and market power have substitute interactive effects that exacerbate the fall in employment or labour share. I conclude that the main driver of the decline in labour share and/or employment is not technological innovation as such but the level of rents that innovating firms are able to extract.
... However, there seems to be no consensus on the direction and magnitude of the relationship. Some empirical studies have found that technological innovation is employment-generating (Reenen, 1997;Gyeke-Dako et al, 2016;Piva & Vivarelli, 2017;Okumu et al, 2019), whereas some other studies have alluded to the fact that technological innovation adversely affects employment (Vivarelli, 2013;Cang, 2017;Yildirim et al, 2020). Even more so, there are studies that have found that technology has mixed effects on employment (Postel-Vinay, 2002;Vicini, 2016;Dachs, 2018;Sithole & Buchana, 2021). ...
... On the other hand, the employment-reducing effect of technological innovation has been closely linked to process innovation -improvement in the production process (Reenen, 1997;Sithole & Buchana, 2021). The argument behind this is that improvement in technology translates to machines replacing humans or reducing the number of humans in the production process, which worsens unemployment, reduces welfare and broadens income gaps. ...
... However, M. Vivarelli (2013) argued that process and product innovation were interrelated, and that process innovation did not always lead to job destruction. Providing support for this stance, I. M. Okumu, E. Bbaale and M. M. Guloba (2019) showed that process innovation had the employment-enhancing effect among African manufacturing firms although J. V. Reenen (1997) argued that only the dominance of product innovation over process innovation would make that possible. ...
Technological advancement continues to revolutionize the labor market and has particularly intensified the debate on its employment effect across developing and developed economies. Employing the Autoregressive Distributed Lag (ARDL) framework, this study provides insights into the employment-innovation nexus across the Nigerian economic sectors using the quarterly data from 2011Q1 to 2021Q4. The findings reveal that the employment-innovation nexus is a short-run phenomenon in Nigeria and that technological innovation enhances employment generation in the service sector and the agricultural sector, but it takes a quarter before the positive employment effect occurs. Overall, the results suggest that technological innovation improves employment and reallocates labor across the sectors, which suggests the need to fully operationalize technological innovation across the Nigerian economic sectors in order to tackle the prevailing unemployment conundrum in the country.
... On the one hand, according to creative destruction theory, innovation is considered to eliminate old jobs but creates new, higher-value roles, resulting in a net positive impact (Mastrostefano & Pianta, 2009). Likewise, innovation leads to job creation through increased firm productivity and Economies 2025, 13, 104 3 of 19 expansion (Blanchflower & Burgess, 1999;Van Reenen, 1997). In addition, the rise of digital industries creates jobs in new sectors; thus, digitalization has contributed to the emergence of entirely new industries, creating millions of jobs in fields such as programming and data analysis (Acemoglu & Restrepo, 2020). ...
... Further research reveals that innovation at the firm level, including digitalization, generally leads to employment growth by creating new job opportunities (Blanchflower & Burgess, 1999). Innovation, particularly through research and development (R&D) investments, fosters job creation within firms and across industries, contributing to positive employment effects (García-Romanos & Martínez-Ros, 2024;Van Reenen, 1997). This belief continues to dominate the concept of employment growth over time. ...
There is increasing concern regarding the association between technological change and jobs. This study explores how different patterns of digitalization and innovation relate to job creation in European companies. We use data from the European Company Survey 2019 collected by Eurofound and Cedefop. We apply Latent Class Analysis (LCA) to identify the typologies of companies, mainly based on their level of technology adoption, innovation practices and employment patterns. We showcase four distinct classes of companies: moderate adoption of digital technology and strong international orientation, traditional and local, medium digitalization, process innovative with local focus and digital leaders and innovators, with specific patterns regarding digitalization, innovation and job creation. The digital leaders and innovators class revealed a high level of digitalization and innovation and maintained stable employment levels, with increased investments in staff training and tendency towards automation. Conversely, less-digitalized traditional companies are more susceptible to stagnation or employment decline. In general, the employment outlook is stable, without significant employment growth, signaling the need for balanced investments in innovation and digitalization that stimulate more and better jobs. This is the first study to apply LCA to explore complex relationships between digitalization, innovation, foreign trade, training investments and employment trends and offers fresh insights into company views towards employment in the digital era.
... The impact of innovations on employment has been analysed empirically in several studies over the past years (see Pfeiffer & Rennings, 2001;König, 1997;König et al., 1995;Smolny & Schneeweis, 1999;Rottmann & Ruschinski, 1998;Brouwer et al., 1993;Van Reenen, 1997). These studies found empirical support for the following hypotheses: Employment Impact of Cleaner Production on the Firm Level 321 i. Product innovations have a positive impact on employment since they create new demand. ...
... Firms with high shares of employees with college or university degrees have a higher probability to increase employment in the wake of innovations. This may indicate that environmentally-oriented innovations are also skill-biased, (see Van Reenen, 1997;Chennels & Van Reenen, 1999). Positive sales expectations are highly significant for increasing employment (this is also found in most other estimations on the firm level, see the discussion in König, 1997). ...
This paper analyses the determinants of employment reactions of firms where environmentally friendly innovations (eco-innovations) were carried out. The data stem from a telephone survey covering more than 1500 firms in five European countries that have recently introduced eco-innovations. We found that product and service innovations create more jobs than process innovations. Moreover, employment impacts differ depending on the intended goals of the innovations. If products and processes are motivated by the goal of cost reduction, they tend to reduce employment. If they are motivated by market share goals, effects can be positive or negative depending on the success of the strategy the firm is following. With respect to skill-biased technogical change, eco-innovations do not differ from other innovations. So, environmental innovations have a small but positive net effect on employment. Thus, environmental support programmes do not counteract labour market policy. A further shift from end-of-pipe technologies to cleaner production, especially towards product and service innovations, would be beneficial for the environment and create jobs.
... Ampirik araştırmalarda, teknolojik gelişmenin istihdama etkisine yönelik farklı sonuçların ortaya çıktığı görülmektedir. Ampirik çalışmaların bir kısmında teknolojik gelişmenin istihdam üzerindeki etkisinin pozitif olduğu sonucuna varılmıştır (Magun (1985); Taymaz (1997); Reenen (1997) (2021)). Çalışmaların bir başka kısmında ise teknolojik gelişmenin ekonomik büyüme üzerinde etkisinin olmadığı bulunmuştur (Piva ve Vivarelli (2002); Demir ve Alparslan (2016); Bavar (2020)). ...
... Çin, İngiltere, Almanya ve Kanada için bu bulgular, sırasıyla Ling vd. (2023),Reenen (1997),Graf ve Mohamed (2024) veMagun (1985) çalışmalarının sonuçlarıyla uyumludur. Japonya için bu bulgu ise, Ni ve Obashi (2021) çalışmasının sonuçlarıyla uyumludur. ...
The impact of technological progress on employment is a highly controversial topic in the theoretical and empirical literature. They are theoretically called optimistic, pessimistic and balancing views, respectively, that technological development increases, reduces and does not affect employment. Nevertheless, there is no common opinion in the empirical literature regarding the effect of technological development on employment. Employment destabilization, which started after the "2008 global crisis", still maintain.
... In this sense, two main empirical approaches have tried to explain the relationship between innovation and employment at the firm level. The first one is basically an input-oriented model also known as the "derived labor demand model" based on the model proposed by Van Reenen (1997) and adapted by Bogliacino et al. (2014), and uses innovation inputs, such as research and development (R&D) expenditure as a proxy for innovation, although some studies apply this approach using patents (as a non-commercial output variable). The second one is an alternative approach that uses commercial results in terms of sales related to new products as an indicator of product innovation and a dummy for the introduction of process innovation. ...
... A first main strand of studies is based on the model proposed by Van Reenen (1997) and adapted by Vivarelli (2014) and Bogliacino et al., (2012Bogliacino et al., ( , 2014. This empirical approach has been used to analyze the innovation effect on employment (e.g., Pellegrino et al., 2019;Bogliacino et al., 2012Bogliacino et al., , 2014Dosi et al., 2021) and on types of skills (e.g., Piva et al., 2004;Araújo et al., 2011). ...
The fast emergence of intensive robotization in combination with artificial intelligence implies a reappearance of the debate about the effects of innovation on the labor market. Many empirical studies have explored this phenomenon at the micro level, especially since the surge of innovation surveys, which use worldwide standardized indicators at the firm level. Most empirical studies suggest a robust, positive labor effect generated by new products, while the impact of process innovations on employment seems to be ambiguous. This paper offers a meta-regression analysis to seek some logical explanations for the results reflected in studies that apply the model proposed by Harrison et al. Our meta-regression suggests that the effect of sales growth due to new products on employment seems to be homogeneous and positive by different types of sub-samples. However, the labor effect of process innovation on employment depends on different circumstances. Its magnitude seems to be more negative for developing countries, manufacturing sectors, and periods of crisis. On the other hand, the magnitude tends to be positive for samples with the methodological approach (using instrumental variables), control variables, and high-tech sectors. The exercise is repeated, splitting the sample between developing and developed countries.
... In particular, we extend a standard labour demand function with a technology factor (i.e. a proxy for innovation) to control for the effect of technological change on employment. This specification has been widely used in prior literature for longitudinal firm-level analysis (see Van Reenen, 1997;Lachenmaier and Rottmann, 2011;Bogliacino et al., 2012;Van Roy et al., 2018). Along these lines, the labour demand function for a panel of firms i over time t is defined as: ...
... We subsequently move from this static expression (1) to a dynamic specification as given in (2), in order to account for viscosity in labour demand (see Arellano and Bond, 1991;Van Reenen, 1997): ...
Based on an analysis of companies developing artificial intelligence (AI) technologies, this study offers fresh evidence on the role of innovation as one of the drivers of employment growth. GMM-SYS estimates on a worldwide longitudinal dataset covering 4,184 firms that patented inventions involving AI technologies between 2000 and 2016 show a positive and significant impact of AI patent families on employment. The effect, presumably of product innovations, is small in magnitude and limited to service sectors and younger firms, which are at the forefront of the leaders of the AI revolution. We also detect some evidence of increasing returns, suggesting that innovative companies more focused on AI technologies are achieving larger impacts in terms of job creation.
... Seven studies analyzed the impact of innovation (Bogliacino and Pianta, 2010;Cozzarin, 2016;Evangelista and Vezzani, 2012;Falk, 2015;Kwon et al., 2015;Pellegrino et al., 2019;Van Reenen, 1997). All of them are firm-level analyses -except for the industry-level study by Bogliacino and Pianta (2010) -and explored whether there are any effects of process/product innovation on labor demand. ...
... The six innovation papers (Evangelista and Vezzani, 2012;Kwon et al., 2015;Pellegrino et al., 2019;Piva and Vivarelli, 2004;Piva and Vivarelli, 2005;Van Van Reenen, 1997) report ambiguous or only weak support for the reinstatement effect. All of them are firm-level regression analyses and confirm a positive effect of product innovation on employment, but a negative effect for process innovation. ...
We systematically review the empirical literature on the past four decades of technological change and its impact on employment, distinguishing between five broad technology categories (ICT, Robots, Innovation, TFP-style, Other). We find across studies that the labor displacing effect of technology appears to be more than offset by compensating mechanisms that create or reinstate labor. This holds for most technology-types, suggesting that anxieties over widespread technology-driven unemployment lack an empirical base. Nevertheless, blue-collar workers have been adversely affected by technological change, and effective up- and reskilling strategies should remain at the forefront of policy making along targeted support systems.
... The Skill Biased Technological Change (SBTC) approach has pointed out the complementarity between new technologies and skills, predicting an increasing share of skilled workers [14][15][16][17][18] in both high income and middle/low income countries [19][20][21][22]. A similar effect has been related to the diffusion of new organisational practices within firms leading to an increasing demand for skilled workers [23][24][25][26]. ...
Building on studies on the impact of the Great Recession on the occupational and skill structure of employment, this article investigates developments over the last business cycle (2002-2007 and 2007-2011) in 36 manufacturing and service industries of five major European countries (Germany, France, Spain, Italy and United Kingdom). We analyse how technology, education and wages have shaped the evolution of four professional groups-Managers, Clerks, Craft and Manual workers-defined on the basis of ISCO classes. During the upswing in manufacturing industries all professional groups except managers have experienced job losses, while new jobs in services have followed a pattern of growing occupational polarization. Demand growth has a general positive effect across all occupations; new products lead to job creation in the group of managers only; wage increases slow down job creation except in the lowest occupational group. During the downswing, large job losses are concentrated in the lowest occupations and most relationships-including the role of demand and wages-break down; product innovation loses its positive impact on jobs while new processes drive restructuring and job destruction across all professional groups.
... While technological advancements have led to job creation, efficiency gains, and skill enhancement, they've also spurred job polarization and income inequality (Van Reenen, 1997;Autor et al., 2006). The rise of high-skill and low-skill jobs at the expense of middle-skill positions has reshaped employment structures within and between industries, exacerbating income disparities (Goos et al., 2014). ...
The current society, known as the supersmart society or Society 5.0, emerged in response to the Fourth Industrial Revolution. also known as Industry 4.0 (I4.0), which arose with the development of different technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), Machine Learning (ML), and Big Data Analytics (BDA), among others. Based on the report “Future of Jobs Report 2023” the most affectin g macro trend in driving business transformation is the increased adoption of new and frontier technologies with an 86.2% rate. I4.0 significantly changed production processes and manufacturing systems, transforming firms into smart factories. One of the consequences of the I4.0 revolution is technological unemployment (TU). This paper aims to conduct a comprehensive evaluation of the literature on Industry 4.0 (I4.0) and Technological Unemployment (TU) within the 2015-2024 timeframe, with a particular focus on their impact on labor market imbalances (LMI). Through a bibliometric analysis, the study will assess performance metrics, including the publication and citation performance of authors, institutions, countries, and journals. Additionally, the research will visualize and critically examine bibliometric citation outcomes, including cited references. To achieve this, we adopted a quantitative approach and employed a confirmatory-explicative research method to elucidate Technological Unemployment (TU) within the context of Industry 4.0 (I4.0) transformations and confirm its implications on Labor Market Imbalances (LMI). Bibliometric analysis was used to discern data patterns, trends, and relationships within the literature. Our findings revealed several significant trends, notably job polarization, income inequality, and TU. We determined that the effects of I4.0 on employment are not universally negative; in some cases, technological investments enhance employment rates by creating new professions and job opportunities. Our analysis also indicated that occupations requiring human judgment, decision-making, creativity, and innovation exhibit resilience to technological advancements.
... Hjort and Poulsen [20], confirms that since the introduction of the Internet several companies have been relocated to African countries (in the ICT sector and the automotive sector etc.) The empirical reformulation of [20] is based on an equation similar to that of Van Reenen [42] models commonly used in this type of research. As consequence, the deployment of new technologies can reduce the price of goods and services, encourage product innovation which allows the labour market to be more attractive and absorb more workers. ...
Technology has a profound impact on the job market, creating both opportunities and challenges for workers, companies and economies. Its effect on employment has been discussed extensively for developed countries while it has not been widely examined in developing countries. This paper provides an examination of the interplay between technology and employment in developing countries through their participation in global value chain in a sample of 33 developing countries over the period 2010-2020. The Dynamic panel bootstrap-corrected fixed effects estimation showed positive and relevant impact of Backward GVC participation and ICT imports on employment, while the effect of forward participation was not significant.
... Crucially, policymakers seeking to design effective job-creation strategies must understand how innovation and market structure affect employment in developing countries. Peters 2014; Giuliodori and Stucchi 2012;Hall, Lotti, and Mairesse 2008;Harrison et al. 2014;Hou et al. 2019;Van Reenen 1997). However, the empirical evidence for process innovation is controversial and ranges from negative (Evangelista and Vezzani 2012) to positive (Greenan and Guellec 2000;Lachenmaier and Rottmann 2011;Zhu, Qiu, and Liu 2021). ...
his study explores the relationship between product and process innovation and employment growth using a dataset of 17,103 firms in 53 developing countries. Employing instrumental variable (IV) estimation, we find that product innovation plays a significant role in driving employment growth in developing countries. Meanwhile, the impact of process innovation on employment appears to be limited. Moreover, we find that the employment effects of product innovation vary substantially depending on the market structure. In particular, within the manufacturing sector, product innovation has a more pronounced positive effect on employment growth at firms with fewer competitors than at their counterparts operating in more competitive environments. Similar effects are observed in the service sector, where heterogeneity is prevalent, primarily within comparable industries such as retail and wholesale trade. These findings emphasize that employment effects innovation are not solely firm-determined but also depend on market conditions and competitors.
... According to the compensation theory, process innovations increase productivity [47; 48] and lead to increased wages [49][50][51], thereby decreasing prices and costs in the market [52][53][54]. On one side, lower costs improve firms' profits and increase production through investment, which stimulates the creation of new jobs [55][56][57][58][59][60][61][62]. On the other side, lower prices lead to increased purchasing power, which triggers the process of economic growth and thus stimulates the creation of new jobs [14; 58; 63-66]. ...
On the cusp of a promising era of technological progress and innovation that seeks to deeply alter the essence of employment, recent research indicates that there is no straightforward answer to how these changes will affect the total labour force. This study endeavours to clarify the complex oscillations between these forces. It employs a robust methodological fusion of theoretical frameworks and empirical scrutiny to dissect the innovation-employment nexus within both OECD and non-OECD economies. A dynamic regression model was utilized, integrating employment variables through the total labour force, and innovation metrics through the Innovation Program 5 for OECD countries, along with the Patent Cooperation Treaty for non-OECD countries. The analysis favoured the robust two-step SYS-GMM estimator over various estimations, including the DIF-GMM, uncovering a positive relationship effect between innovation and employment. Specifically, the study reveals that the IP5 exerts a significant positive effect on the labour force within OECD countries, endorsing the labour-friendly nature of innovation. Conversely, the PCT demonstrates a marked beneficial effect on employment in non-OECD countries. These insights shed light on the nuanced and favourable interplay between innovation and employment across diverse economies, accentuating the temporal and interdependent nature of their association. The need for in-depth knowledge of innovation and its specific effects on employment is crucial for policy-makers. This entails the development of tailored policies and strategic plans intended for the patenting and exploiting innovations aiming at strengthening employment in its economic environment, in specific business environments and taking account of temporal and contextual factors.
... According to the compensation theory, process innovations increase productivity [47; 48] and lead to increased wages [49][50][51], thereby decreasing prices and costs in the market [52][53][54]. On one side, lower costs improve firms' profits and increase production through investment, which stimulates the creation of new jobs [55][56][57][58][59][60][61][62]. On the other side, lower prices lead to increased purchasing power, which triggers the process of economic growth and thus stimulates the creation of new jobs [14; 58; 63-66]. ...
On the cusp of a promising era of technological progress and innovation that seeks to deeply alter the essence of employment, recent research indicates that there is no straightforward answer to how these changes will affect the total labour force. This study endeavours to clarify the complex oscillations between these forces. It employs a robust methodological fusion of theoretical frameworks and empirical scrutiny to dissect the innovation-employment nexus within both OECD and non-OECD economies. A dynamic regression model was utilized, integrating employment variables through the total labour force, and innovation metrics through the Innovation Program 5 for OECD countries, along with the Patent Cooperation Treaty for non-OECD countries. The analysis favoured the robust two-step SYS-GMM estimator over various estimations, including the DIF-GMM, uncovering a positive relationship effect between innovation and employment. Specifically, the study reveals that the IP5 exerts a significant positive effect on the labour force within OECD countries, endorsing the labour-friendly nature of innovation. Conversely, the PCT demonstrates a marked beneficial effect on employment in non-OECD countries. These insights shed light on the nuanced and favourable interplay between innovation and employment across diverse economies, accentuating the temporal and interdependent nature of their association. The need for in-depth knowledge of innovation and its specific effects on employment is crucial for policy-makers. This entails the development of tailored policies and strategic plans intended for the patenting and exploiting innovations aiming at strengthening employment in its economic environment, in specific business environments and taking account of temporal and contextual factors.
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https://www.virtual-economics.eu/index.php/VE/article/view/350/149
... In this section, we formalize this intuition by laying out a simple model of derived labor demand for a firm competing in an oligopoly. The model extends traditional derived demand models (Van Reenen, 1997;Ugur et al., 2016), to AI technologies, adding endogenous production technology whereby tasks are allocated according to the relative productivity merits of AI automation/innovation mix (Zeira, 1998;Acemoglu and Restrepo, 2018;Babina et al., 2020). ...
Introduction
An intense debate has been on-going about how artificial intelligence (AI) technology investments have an impact on employment. The debate has often focused on the potential of AI for human task automation, omitting the strategic incentive for firms to cooperate with their workers as to exploit AI technologies for the most relevant benefit of new product and service innovation.
Method
We calibrate an empirical probit regression model of how changes in employment relate to AI diffusion, based on formalizing a game-theoretical model of a firm exploiting the twin role of AI innovation and AI automation for both absolute and competitive advantage.
Results
The theoretical game-theory prediction is that employment following AI technology adoption is not negative, and ultimately depends on how AI leads to new success in innovation, competition which defines the competitive reward of innovation and profit sharing between workers and firms. Our estimation, is based on a global survey of 3,000 large companies across 10 countries, demonstrates that a firm employment growth depends on two strategic postures, that is, the firm relative maturity of AI adoption as well as its relative bias toward AI-based product innovation.
Discussion
The contribution of this research is to highlight the twin role of firm and workers in shaping how technology will affect employment. AI in particular marries the potential of task automation with even more potential for expansion.
... The empirical debate regarding the relationship between ICT developments and workforce dynamics can be seen in various existing studies. The positive impact between the development of ICT and the employment rate can be explored in several studies, such as Reenen (1997) for the case in the U.K.; Crandall et al. (2007) in the U.S.; Evangelista et al. (2014) in Europe; and Falk & Biagi (2017) in Europe. However, this positive result was not found by Shideler et al. (2007) dan Bessen (2019) in the U.S. context. ...
This study explores the relationship between ICT development and the unemployment rate in a cross-country setup. The relationship between the development of ICTs and human labour has always been debated among researchers. The debate revolves around whether ICT substitutes or complements human labour. This relationship still has not ended at a meeting point. This study utilizes the ICT index from International Telecommunication Unit to capture broader coverage of ICT development in the country. This index arguably improves the accuracy and comparability of variable measurement. Furthermore, this research conducts a heterogeneity analysis of ICT's impact by considering the unemployed education level and the country's development stage. The empirical method employs in panel data setup, namely Fixed Effect Model. The data consist of 57 countries in the period 2015-2017. Interestingly, this study finds that ICT development corresponds to a decrease in total unemployment by 1%, with the largest effect on unemployed with medium education. By heterogeneity analysis, this beneficial effect is only applied in developed countries. The study results indicate that the developing country should be more cautious and adaptive in mitigating the rapid ICT waves.
... In this way, the computer algorithms can efficiently operate based on the rule. This model has been conceptualized in the literature as "skill-biased technical change," which implies that highly skilled workers will be the winners here [5], [16], [21]. ...
While the emergence of the Industry 4.0 (I4.0) concept has heightened concerns about how digital transformation will affect employees, engineers who create, develop, and spread the I4.0 tools and technologies are ignored. Also, the industries with the highest digital maturity should be prioritized since they are the readiest ones for the I4.0 transformation. In this context, our focus is the engineers in the Turkish white goods industry, one of the three industries with the highest level of digital maturity in Turkey. We aim to determine the new skills expected from engineers and to uncover the impact of the perceived usage level of I4.0 technologies by engineers on the dimensions of engineering work. In this article, we conducted two separate surveys for engineers and managers and sought answers to four research questions using factor analysis and regression analysis. The results show that the new skills are divided into intrinsic motivation, technology, and data and information skills. At the same time, the perceived usage level of I4.0 technologies influences the social characteristics dimension of engineering work. We revealed that the sociability level of the engineers who use data analytics, artificial intelligence, simulation, and RFID/RTLS technologies while performing their jobs tends to decrease, while the sociability level of the engineers who use adaptive robots and additive manufacturing technologies gets higher.
... While it points to product innovation as having a positive effect on employment (see, e.g. Chennells and Van Reenen, 2002;Hall et al., 2008;Smolny, 1998Smolny, , 2002Van Reenen, 1997;Calvino and Virgillito, 2016), process innovation sometimes has a job displacement effect (Vivarelli, 2015;Piva and Vivarelli, 2018). ...
Purpose
Although employees' creativity is vital for firm innovation and overall performance, little is done to examine the potential association between creativity and employment. This paper investigates the contribution of employees' creativity, process and product innovations to firm-level employment growth.
Design/methodology/approach
The authors use data from World Bank Enterprise Survey and Innovation Follow-up Survey on 9503 firms covering the period 2012–2015 in 11 countries from sub-Saharan Africa and Heckman's two-stage estimation model.
Findings
This study's results indicate a positive role of creativity on firm-level employment growth. In addition, the authors find evidence for a complementary effect arising from the combination of creativity with managerial experience, staff level of education and their associated skills, in contrast, combining creativity with internal or external R&D results in a substitution effect. Interestingly, these synergy effects are pronounced for SMEs but absent for large firms.
Practical implications
Policy makers in developing economies of sub-Saharan Africa should stimulate company management to use free time offered to employees to be creative in the workplace as one of their key strategies to stimulate employment growth. This strategy is expected to be particularly fruitful among SMEs having some managerial experience and skilled stuff.
Originality/value
In contribution to innovative work practices and workforce creativity, the authors demonstrate that providing employees with free time could be an alternative way to enhance the focal firms' performance.
We provide new evidence of the relationship between technical change and employment in the UK, accounting for heterogeneous technologies and heterogeneous labour. Using industry-level data covering the 1995–2019 period, our analysis, based on a derived labour demand function, rejects the labour-replacement effect of technology. Both investments in Innovation and Communication Technologies (ICT) and in innovative properties are positively correlated with overall employment and with the employment of workers with different skills. Total Factor Productivity (TFP) is the only technology indicator to be negatively associated with employment, particularly when considering intermediate-skilled workers. However, the net effect of technology remains positive. Our results also show that the relationship between technology and labour demand has not changed after the financial crisis, due to the muted UK labour market response to the crisis.
Reflections on the problems facing the labour market in Nigeria and the need to proffer solutions to the high unemployment rate in the country call for an assessment of the possible relationship between innovation and unemployment between 1990 and 2020. Hence, this study examines whether innovation is a key determinant of unemployment, and the role it plays in the face of increasing unemployment rates. Autoregressive Distributed Lag (ARDL) bounds testing to cointegration approach and Vector Error Correction Mechanism (VECM) for the exploration of long-run causal association are the major techniques employed in the study. The results indicate that the explanatory variable, which is process innovation, measured by patent applications, residents, is adversely associated with the dependent variable (unemployment rate) in the long run as well as in the short run, suggesting a decreasing effect. In addition, it is observed that increased innovation drive is necessitated by the high unemployment rate in the economy, suggesting a one-way causal relationship, whereby unemployment promotes innovation efforts. The study, therefore, establishes that unemployment is one of the developmental problems facing Nigeria, thereby supporting the view that innovation remains a key factor required to address the alarming unemployment situation, as the country's unemployment rate has reached 33.3% based on the NBS report, 2021.
The current society, known as the supersmart society or Society 5.0, emerged in response to the Fourth Industrial Revolution, also known as Industry 4.0 (I4.0). This revolution arose with the development of technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), Machine Learning (ML), and Big Data Analytics (BDA). According to the Future of Jobs Report 2023, the most significant macro trend driving business transformation is the increased adoption of frontier technologies, with an 86.2% rate. I4.0 has reshaped production and manufacturing, transforming firms into smart factories. One consequence of I4.0 is technological unemployment (TU). This paper evaluates the literature on I4.0 and TU from 2015 to 2024, focusing on labor market imbalances (LMI). Through bibliometric analysis, it assesses publication and citation performance across authors, institutions, countries, and journals. Additionally, it examines bibliometric citation trends, including cited references. To achieve this, we adopted a quantitative approach and a confirmatory-explicative research method to analyze TU within I4.0 transformations and its impact on LMI. Bibliometric analysis was used to identify data patterns, trends, and relationships in the literature. Our findings reveal significant trends, notably job polarization, income inequality, and TU. However, the effects of I4.0 on employment are not universally negative; in some cases, technological investments create new professions and job opportunities. Occupations requiring human judgment, decision-making, creativity, and innovation show resilience to technological advancements.
This paper examines the real effects of tax incentives on managerial decisions regarding capital investments, employment, and tax avoidance among private firms. Even if theory and prior literature show that introducing a tax incentive in the form of a bonus depreciation scheme increases corporate investment, some unexplored aspects remain regarding its real effects. By exploiting Hyper-Depreciation, a provision of the Industry 4.0 Plan enacted by the Italian government, results show that this kind of tax depreciation scheme stimulates capital investments with heterogeneous responsiveness by firms regarding intangibles compared to tangible assets. Additionally, such an incentive positively affects labour productivity without eroding employment levels. A significant reduction in effective tax rates during the bonus era suggests that firms respond to such a measure by aggressively reaping tax savings.
This study examines the relationship between labour market changes and artificial intelligence, utilising Romer’s Endogenous growth theory, Schumpeter’s Creative destruction, Solow’s Growth model and Becker’s Human capital theory as theoretical frameworks. The purpose of this research is to clarify the multifaceted impacts of artificial intelligence on economic growth, workforce adjustment and the emergence of novel employment trends, focusing specifically on job losses and gains, wage inequalities, and changing skill requirements. Using a structured literature review methodology, the economic implications of artificial intelligence in the labour market were systematically analysed and synthesised. The results suggest that although artificial intelligence significantly enhances productivity and innovation, it has a complex effect on the labour market, causing employment gains in technologically sophisticated industries and losses in sectors prone to automation. The study emphasises strategic policy interventions and pedagogical reforms that maximise the economic benefits of AI while minimising its disruptive effects on employment. Proponents of such policies argue that by cultivating a workforce that is resilient and capable of adjusting to changes driven by artificial intelligence, they can effectively mitigate inequality and safeguard economic stability.
How do research and development (R&D) investments stimulate the local economy? Our paper complements and extends the voluminous literature on the externalities of R&D investments by looking at internal firm growth across regions and the “spillovers” from R&D workers on other workers within the same firm. More specifically, we examine how R&D investments affect the change in employment and productivity in the same firm over time. We also investigate the differences that come with domestic or foreign ownership. Combining data from the Swedish biennial survey series on R&D with firm and establishment registers, we find that R&D-stimulated growth is a localized phenomenon: firms tend to grow in the same regions where they invest in R&D activities. This link is particularly strong for employment effects. While we find that the positive association between R&D and labor productivity holds for all firms, growth effects on local employment are limited to domestically owned firms, especially in manufacturing. The results strengthen our understanding of the correlation between R&D and firm growth on a local level, and contribute to both the academic and policy debate on the effects of globalization on local economic growth.
Teknolojik gelişmelerin göstergesi olan Ar-Ge üretim sürecinde önemli bir faktördür. Ar-Ge harcamaları üretim faktörlerini etkileyerek ilgili sektörlerin istihdam yapısında değişikliğe yol açabilir. Araştırmada Ar-Ge harcamalarının istihdam ve büyüme üzerindeki etkisini tespit etmek amacıyla 2013-2022 dönemi TÜİK verileri kullanılarak NACE Rev2 sınıflandırma sistemine göre verilere ulaşılan on üç farklı sektöre ilişkin Ar-Ge harcama tutarları, üretim geliri ve istihdam sayısı ele alınmış ve söz konusu verilerle panel veri seti oluşturularak analiz yapılmıştır. Yapılan analiz sonucunda Ar-Ge harcamaları ve büyüme arasında uzun dönemli ilişkinin olduğu tespit edilmiştir. Oluşturulan modelde uzun dönem parametreleri sırasıyla Ar-Ge için 0,128 sabit katsayı için -1,468 olarak tespit edilmiş ve her iki değişkeninde anlamlı olduğu görülmektedir. Dolayısıyla uzun dönemde Ar-Ge harcamaları büyüme değişkenini etkilemektedir. Ar-Ge harcamasındaki %1’lik artış üretimi yaklaşık %13 arttırmaktadır. Ayrıca sektörel Ar-Ge harcamaları arttığında İmalat, Elektrik, Eğitim ve Sanat Gösteri Eğlence Hizmetleri sektörleri olumlu etkilenerek üretim miktarını artırırken; Mesleki Bilimsel ve Teknik Hizmetler sektöründe ise üretim miktarını azalttığı söylenebilir. Ar-Ge harcamaları ve istihdam arasında uzun dönemli ilişkin olmadığı fakat sektörler ayrı ayrı değerlendirildiğinde Ar-Ge harcamalarının Maden, İmalat, Elektrik, Bilgi İletişim ve Sanat Gösteri Eğlence Hizmetleri alanlarında istihdamı olumlu etkilerken; İnşaat ve Toptan-Perakende Ticaret sektörlerinde ise istihdamı olumsuz etkilediği tespit edilmiştir.
L’innovation technologique est devenue une
préoccupation majeure pour tous les pays du monde. Les
développements théoriques et les études empiriques ne cessent
de foisonner autour de ce thème central qu’est l’innovation.
Dans une accélération des mutations technologiques et un
environnement ouvert sur le monde, l’innovation
technologique devient une variable-clé de la compétitivité des
économies locales (Saafi, 2011). Toutefois, cette accélération
s’est accompagnée par une montée d’un chômage massif et un
sous-emploi dans un nombre important de pays dont l’Algérie.
L’objectif principal de cet article est de déterminer à partir
d’une étude économétrique par les données de panel, les effets,
de court et de long terme, de la diffusion des innovations
technologiques sur l’emploi en Algérie. Nous avons utilisé la
méthode de moments généralisés (MMG) (Arellano et Bond,
1991) afin d’estimer l’équation de la demande d’emploi par
rapport aux différentes variables explicatives dans un panel du
secteur d’activité industrielle en Algérie. Nos résultats
montrent que, l’effet à court terme des innovations sur
l’emploi est positif, et cet effet est négatif à moyen et long
terme. Ces résultats contredisent la théorie de compensation
qui stipule que, l’innovation technologique détruit des emplois
à court terme, c’est l’effet de remplacement, alors qu'à moyen
et à long terme en crée des emplois donc c’est l’effet de
compensation (Vivareli, 1995 ; Saafi, 2011). L’Algérie ne
ne semble pas profiter pleinement en termes des technologies
importées et de croissance d’emplois.
Bu çalışma, Türk imalat sanayinde BİT kullanımının iş gücü talebine etkisini analiz etmeyi amaçlamaktadır. BİT kullanım değişkeni olarak CRM, SCM ve ERP kullanımı alınmıştır. 2009-2021 dönemi için sistem GMM tahmincisi kullanılarak hem imalat sanayi hem de imalat sanayinin teknoloji yoğunluğuna göre sınıflandırılan alt sektörlerini kapsayan analizler yapılmıştır. Analiz sonuçlarına göre, BİT kullanımının iş gücü talebini olumlu yönde etkilediği ve telafi mekanizmasının hem imalat sanayinde hem de düşük, orta ve yüksek teknoloji yoğunluğuna sahip sektörlerde doğrulandığı sonucuna varılmıştır.
Resumen Este trabajo aporta evidencia del efecto de la innovación sobre el empleo en dos países donde tal impacto no ha sido analizado previamente: México y Ecuador. Siguiendo el método propuesto por Harrison et al. (2014) encontra-mos que la introducción de nuevos productos en el mercado afecta positiva-mente el empleo en México y Ecuador. En cambio, la innovación de proceso tiende a destruir empleo en México, pero no en el caso de Ecuador. Se observa que el resultado positivo de la innovación de producto es mayor que la pérdida de empleo causada por la innovación de proceso. Palabras claves: Innovación de producto y proceso; demanda de empleo; pro-ductividad laboral. Esta investigación se realizó gracias al PAPIIT IN302620 de la DGAPA-UNAM. Los autores agradecen los valiosos comentarios y sugerencias de los revisores anónimos que permitieron enriquecer el trabajo.
This paper is a critical review of the empirical literature resulting from recent years of debate and analysis regarding technology and employment and the future of work as threatened by technology, outlining both lessons learned and challenges ahead. We distinguish three waves of studies and relate their heterogeneous findings to the choice of technological proxies, the level of aggregation, the adopted research methodology and to the relative focus on robots, automation and AI. The challenges ahead include the need for awareness of possible ex‐ante biases associated with the adopted proxies for innovation; the recognition of the trade‐off between microeconometric precision and a more holistic macroeconomic approach; the need for granular analysis of the reallocation and transformation of occupations and tasks brought about by different types of new technologies; the call for a closer focus on impacts on labor quality, in terms of types of jobs and working conditions.
The empirical research finds a contingent, slightly positive net effect on the relationship between digitalization and employment, resulting from the automation and reinstatement of jobs, the two countervailing forces revealed by the theoretical literature. We dig down at the features of this relationship, using two waves of Innobarometer surveys to capture the innovation investments of a sample of European enterprises in 2015 and 2016. Adding to previous studies, we identify an inverted U‐shape between degrees of digitalization and employment; this effect is more prominent in small companies with fewer than 50 employees. The effect diminishes for very large companies. In addition, we show complementarity links between research and development (R&D) investments and digital ones proxied by investing in software development and acquiring hardware and software. Specifically, we find support for a positive association between employment and investment in information technology (IT) assets and R&D. On average, companies that invest in both IT and R&D have 11.5% more employees than those that embrace just one. While we observe that small companies that invest in either type of IT asset employ more people, at larger enterprises, the positive effect is only found when they invest in both. The study supports the findings using alternative regression methods, quantile, and Lewbel instrumental variables.
This study examines the effects of technological advancements on changes in the labor structure within Vietnam's manufacturing and processing industries. The study utilizes a panel dataset that combines each year's enterprise census data from 2012 to 2018 with the enterprise statistics of technology data provided by the Vietnam General Statistics Office throughout the same timeframe. This study highlighted four key aspects that contribute to technology-related challenges. These factors include external technology purchasing, research and development activities, absorbability of technology, and the influence of Foreign Direct Investment firms. The study tested the endogeneity in the model, overcame the defects of the model, and selected the fixed effect model to assess the four factors affecting labor structural change. The Lilien index is used to measure the level of structural change in labor in the manufacturing and processing industries of Vietnam. The results show that external technology acquisition and R&D activities had a positive effect on the Lilien index. Moreover, compelling data indicates that the location of technology acquisition has a contrasting influence on labour structural change, with varying effects observed in enterprises that employ high versus low levels of technology. The findings will serve as a significant indicator for governmental entities and management in formulating policies aimed at enhancing the overall efficiency of firms and facilitating labour restructuring initiatives.
1980’li yıllardan itibaren geçerli olan ‘Yeni Dünya Düzeni’, başta ekonomik olmak üzere sosyal, siyasi ve kültürel yapıdaki birçok değişimi barındırmaktadır. Teknolojik gelişmeler ile ortaya çıkan inovasyon süreci ise küresel çapta yaratılan fırsatlar ve beraberinde getirdiği tehditler ile bu Yeni Dünya Düzeninin sınırlarını çizmektedir. İnovasyonun etkilerinin yaratıcı mı yoksa yıkıcı mı olduğu üzerine farklı argümanlar ortaya atılmakla birlikte, etkilerinin daha çok öngörülemez olması bu konu hakkında fikir birliğine varmayı zorlaştırmaktadır. Bunun en iyi örneklerinden biri ise istihdam üzerindeki iki yönlü etkisidir. Nitekim ürün inovasyonunun verimliliği arttıracağı ve yeni iş kolları yaratarak işsizliği azaltacağı, süreç inovasyonunun ise hızla değişen teknolojiye karşı beceri, organizasyon ve teknolojiye adaptasyon eksikliği ile işsizliği arttıracağı genel kanısı hakimdir. Bu çalışmada küresel ekonomilerde inovasyonun yarattığı fırsatların yanı sıra, tehditlerin incelenmesi amacıyla Küresel İnovasyon Endeksi (KİE) ile işsizlik arasındaki ilişki İki Aşamalı Genelleştirilmiş Momentler (GMM) Tahmincisi kullanılarak test edilmiştir. Çalışmada KİE’nin en yüksek olduğu ilk 25 ülkenin 2009-2021 yılları arası verileri kullanılmış olup, sonucunda toplam işsizlik ile brüt sermaye yatırımları ve kişi başına GSYİH oranı arasında negatif ve anlamlı, KİE ile toplam işsizlik arasında ise pozitif ve anlamlı bir ilişki bulunmuştur. Bu sonuç inovasyon sürecinin işsizliği arttırdığının bir kanıtıdır. Son olarak yapılan Granger panel nedensellik test sonuçlarına göre KİE ve brüt sermaye yatırımları ile toplam işsizlik arasında çift yönlü nedensellik ilişkisi olduğu tespit edilmiştir.
This paper provides a first look into the joint effects of research and development (R&D) and market power on the cyclicality of employment. It presents a theoretical model with R&D and monopolistically competitive firms which shows that firms smooth their R&D activities when they face large R&D adjustment costs. This smoothing behavior comes at the expense of higher labor volatility, and it is stronger for firms with high R&D intensity and low market power. Firm‐level data support these predictions. Dynamic panel estimations reveal that employment at competitive firms engaging in a high level of R&D is more procyclical.
Employment growth is one of the most crucial indicators for economic policy. Existing studies show that only a small fraction of firms experience high growth rates and create the most new jobs. Making use of recentered influence function regressions, this study examines the effects of process and product innovations on the employment growth distribution. The analysis is based on firm data from Eastern European countries. The effects of process innovation on job creation are ambiguous. An increase in firms with products and services that are new to the market shape the upper tail of the employment growth distribution. Product and service innovations thus cause skewness of the employment growth distribution and are a major determinant of job creation. This study therefore presents evidence on whether and how innovation activities affect employment growth and contributes to the lively debate about how to foster employment growth.
Understanding the potential effect of environmental regulation on employment is of broad interest to key stakeholders. Concerns encompass both short- and longer-term effects on workers within the regulated sector, affected communities that already suffer from a lack of employment opportunities, and net employment in the overall economy. We begin our review by presenting a neoclassical microeconomic framework demonstrating how environmental regulations might affect labor demand. We then summarize the main empirical findings from the literature, including sector-specific partial equilibrium estimates and general equilibrium approaches to identifying the employment impacts of regulations. We also briefly describe the literature on how environmental regulations affect labor supply. Finally, we discuss remaining research gaps.
Expected final online publication date for the Annual Review of Resource Economics, Volume 15 is October 2023. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.
The rising rate of unemployment in Nigeria in general and Kogi State in particular, calls for modern day innovations that Information and Communication Technology (ICT) offers. In this study, the impact of access to, ownership and utilization of ICT on employment generation in rural areas in Kogi State was investigated. The study made use of the Shapiro-Stiglitz model of employment. Primary data were collected through household survey using structured questionnaire. The structured questionnaire was validated in a departmental seminar where the proposal and draft of the instrument were presented. Multi-stage sampling method was adopted to select 10 households each from 120 rural communities that were earlier randomly selected from the 21 Local Government Areas (LGAs) of the State. This makes a total sample of 1,200 households used in the survey. Three models of regression were estimated in the study using binary choice (LOGIT) technique. The findings of the study were that households' utilization of ICT has had positive and significant impact on employment generation in Kogi State at 5 percent significance level. However, households' access and ownership of ICT did not have statistically significant impact on employment generation in rural areas of Kogi State. The study concluded that the utilization of ICT has positively impacted the people in terms of employment generation in the rural areas of Kogi State. The study recommended that Kogi State government, Non-Governmental Organizations and individual philanthropists should establish more ICT training centres and Community Internet Service Centres (CISC) in rural areas. Also, rural dwellers in Kogi State should make themselves available for ICT training.
This study investigates the relationship between digitalisation, unemployment, and divorce rates in Türkiye by using the Fourier Toda Yamamoto Causality Test from 2007 to 2021. International Digital Economy and Society Index (I-DESI) has been used to indicate digitalisation. The results suggest that there is unilateral causality from digitalisation to divorce rates. However, there is no causality linkage between digitalisation and unemployment rates for the period 2007-2021. Moreover, there is no causal connection between unemployment rates and divorce rates. The findings show that digitalisation affects divorce rates by disrupting family communication.
This work correlates the impact of robotization on employment and households’ income at the regional scale with the level of investment in R&D and education policies. This kind of policy, by raising the qualitative and quantitative levels of human capital, contributes to improving the complementarity effect between humans and robots, thus mitigating the substitution effect. To this end, we compute the Adjusted Penetration of Robots (APR) (a metric used to measure the extent to which robots are being used in a particular industry or sector) at the sectoral level, combining the International Federation of Robotics database for the stock of robots, EUROSTAT Regional database, and the STructural ANalysis database on 150 NUTS-2 regions of the Euro area. We then perform a spatial stacked-panel analysis on the investment in R&D and education level. Results supports the idea that regions that invest more in R&D and have higher levels of human capital can turn the risk of robotization into an increase in both income and "quantity of work," by enhancing complementarity between robots and the labor force. On the contrary, regions investing less in R&D and having lower levels of human capital may suffer a reduction in households’ disposable income.
This paper presents a cross-sectional study for the United Kingdom in which inter-industry total factor productivity (TFP) growth is associated with different indicators of innovative activity. Section II explores the relationship between innovative activities and productivity advance in the light of the inter-industrial character of technical change and according to the alternation of periods characterized by a dominant techno-economic paradigm with periods of rapid technological change. Section III analyses the performance of British manufacturing industries in terms of productivity growth across various periods between 1954 and 1984. Section IV describes how the indicators of innovative activity are measured by considering in particular the role of inter-industry technology transfer. Having related TFP rates of growth in the above-mentioned indicators, Section V presents the results of the cross-industry analysis for the different periods considered. -from Author
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.