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New Evidence on the Effect of Technology on Employment and Skill Demand

Author

Listed:
  • Hirvonen, Johannes
  • Stenhammar, Aapo
  • Tuhkuri, Joonas

Abstract

We present novel evidence on the effects of advanced technologies on employment, skill demand, and firm performance. The main finding is that advanced technologies led to increases in employment and no change in skill composition. Our main research design focuses on a technology subsidy program in Finland that induced sharp increases in technology investment in manufacturing firms. Our data directly measure multiple technologies and skills and track firms and workers over time. We demonstrate novel text analysis and machine learning methods to perform matching and to measure specific technological changes. To explain our findings, we outline a theoretical framework that contrasts two types of technological change: process versus product. We document that firms used new technologies to produce new types of output rather than replace workers with technologies within the same type of production. The results contrast with the ideas that technologies necessarily replace workers or are skill biased.

Suggested Citation

  • Hirvonen, Johannes & Stenhammar, Aapo & Tuhkuri, Joonas, 2022. "New Evidence on the Effect of Technology on Employment and Skill Demand," ETLA Working Papers 93, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:wpaper:93
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    Citations

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    Cited by:

    1. Toon Van Overbeke, 2023. "Conflict or cooperation? Exploring the relationship between cooperative institutions and robotisation," British Journal of Industrial Relations, London School of Economics, vol. 61(3), pages 550-573, September.
    2. Alex Chernoff & Gabriela Galassi, 2023. "Digitalization: Labour Markets," Discussion Papers 2023-16, Bank of Canada.
    3. Heyman, Fredrik & Olsson, Martin, 2022. "Long-Run Effects of Technological Change: The Impact of Automation and Robots on Intergenerational Mobility," Working Paper Series 1451, Research Institute of Industrial Economics, revised 29 Jun 2023.
    4. Andreas Baur & Lisandra Flach & Isabella Gourevich & Florian Unger, 2023. "North-South Trade: The Impact of Robotization," CESifo Working Paper Series 10865, CESifo.
    5. Arntz, Melanie & Blesse, Sebastian & Doerrenberg, Philipp, 2022. "The end of work is near, isn't it? Survey evidence on automation angst," ZEW Discussion Papers 22-036, ZEW - Leibniz Centre for European Economic Research.
    6. Paulo Bastos & Lisandra Flach & Klaus Keller, 2023. "Robotizing to Compete? Firm-level Evidence," Rationality and Competition Discussion Paper Series 467, CRC TRR 190 Rationality and Competition.

    More about this item

    Keywords

    Technology; Labor; Skills; Industrial policy;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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