Technological Effects on Employment and Productivity in Developing World: Domestic Versus Imported Expertise

Will technological advances lead to job displacement in developing economies, necessitating innovative approaches to tackle widespread unemployment and productivity slump? This study attempts to answer this question and examines the effects of imported technology, imported inputs, foreign ownership and in-house innovation on productivity and employment of firms. For this purpose, we analyse enterprise-level survey data for developing countries across the world. In terms of labour productivity, we noted that it varies inversely with all three foreign sources. However, the combined effect of foreign technology and imported input on labour productivity is positive which may be indicative of the complementary relationship between the two. We also find that foreign technology and input imports have a positive impact on total factor productivity (TFP). Foreign technology, imported goods and foreign ownership have a positive effect on employment as well. We also noted that domestic innovation and R&D create more jobs in companies. Our findings also indicate that different sources of technology work together to enhance the productivity; thus, policymakers in developing economies take note of this in policy formulation.