The Impact of R&D on Skill-specific Employment Rates in the UK and France

We apply nonlinear Autoregressive-Distributed Lag (ARDL)-based methodologies to examine the nature of the effects of changes in R&D (intensity) on the employment rates of ‘high-skill’, ‘medium-skill’ and ‘low-skill’ labour and also whether or not these effects are symmetric. The empirical results based on the annual data for the period of 1991–2017 have suggested that while increased R&D has favourable effects on the employment rate of ‘high-skill’ labour in France, it has a negative impact on this type of labour in the UK. On the other hand, while the given increase in R&D has been found to be negatively affecting the employment rates of both ‘low-skill’ and ‘medium-skill’ labour in France, it has no impact on the employment rates of these two types of labour in the UK. These results may suggest that the dominant form of technological change in France is possibly a combination of ‘low-skill automation’ and ‘task-based’ whereby new technologies are simultaneously leading to replacement of ‘low-skill’ and ‘medium-skill’ labour by machines and the creation of new tasks (jobs) in which ‘high-skill’ labour has a comparative advantage. In the UK, the dominant form of new technologies resulting from additional R&D efforts seems to be in the form of ‘high-skill automation’ whereby ‘Robotics and Artificial Intelligence’ kind of new technologies might be causing replacement of ‘high-skill’ labour with machines. These results suggest that new technologies might be exerting adverse effects on income distribution in different ways in the UK and France.