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Digitalization, Multinationals and Employment: An Empirical Analysis of Their Causal Relationships

Author

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  • Gómez-Plana Antonio G.

    (Department of Economics, Universidad Pública de Navarra and INARBE, Campus de Arrosadía, Pamplona31006, Spain)

  • Latorre María C.

    (Departamento de Economia Aplicada, Facultad de Estudios Estadísticos, Estructura e Historia, Universidad Complutense de Madrid, Avda. Puerta de Hierro 1, Madrid28040, Spain)

Abstract

This study measures the effects of digitalization related to Information and Communication Technologies (ICT) investment on employment and other economic variables according to firms‘ ownership. We present two computable general equilibrium models (with full employment and with unemployment) which differentiate two types of firms: National and foreign multinationals (MNEs). Both types of firms allow for the substitution between labour and ICT capital. We conclude that ICT investments significantly create jobs and raise real wages, GDP and welfare. The aggregate positive effects are stronger for ICT investment in national firms than in foreign MNEs although the sign of some sectoral effects can be negative. We also analyze the role of wage flexibility in this context, with the most favorable results related to scenarios where wages are more rigid for both cases, when investors are national firms or foreign MNEs. The model is applied to the case of Spain, a country with a high unemployment rate where ICT investment has been large since the mid 1990s.

Suggested Citation

  • Gómez-Plana Antonio G. & Latorre María C., 2019. "Digitalization, Multinationals and Employment: An Empirical Analysis of Their Causal Relationships," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(3), pages 399-439, June.
    • Handle: RePEc:jns:jbstat:v:239:y:2019:i:3:p:399-439:n:2
    DOI: 10.1515/jbnst-2017-0153
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    References listed on IDEAS

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    More about this item

    Keywords

    computable general equilibrium; investment; information and communications technologies; employment; multinationals;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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