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Modern manufacturing capital, labor demand, and product market dynamics: Evidence from France

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  • Philippe Aghion

    (INSEAD - Institut Européen d'administration des Affaires, LSE - London School of Economics and Political Science, Collège de France - Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France)

  • Céline Antonin

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po, Collège de France - Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France)

  • Simon Bunel

    (Institut national de la statistique et des études économiques (INSEE), Centre de recherche de la Banque de France - Banque de France, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Xavier Jaravel

    (LSE - London School of Economics and Political Science)

Abstract

We use comprehensive micro data in the French manufacturing sector between 1995 and 2017 to document the effects of a fall in the cost of investments in modern manufacturing capital, including modern automation technologies, on employment, wages, sales, prices, and business stealing. Causal effects are estimated with event studies and a shift-share IV design leveraging predetermined supply linkages and productivity shocks across foreign suppliers of manufacturing capital. At all levels of analysis-plant, firm, and industry-the estimated impact of capital investments on employment is positive, even for unskilled industrial workers. Furthermore , we find that capital investments lead to higher sales and exports, higher profits, and lower consumer prices, while wages and wage inequality remain unchanged. We estimate a positive industry-level employment response to manufacturing capital investments only in industries that are exposed to import competition, due to business-stealing across countries. Thus, typical investments in modern manufacturing capital lead to an increase in domestic labor demand and promote competitiveness in international markets.

Suggested Citation

  • Philippe Aghion & Céline Antonin & Simon Bunel & Xavier Jaravel, 2022. "Modern manufacturing capital, labor demand, and product market dynamics: Evidence from France," SciencePo Working papers Main hal-03943312, HAL.
  • Handle: RePEc:hal:spmain:hal-03943312
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03943312
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    Cited by:

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    3. David Autor & Caroline Chin & Anna M. Salomons & Bryan Seegmiller, 2022. "New Frontiers: The Origins and Content of New Work, 1940–2018," NBER Working Papers 30389, National Bureau of Economic Research, Inc.
    4. Gregor Singer, 2024. "Complementary Inputs and Industrial Development: Can Lower Electricity Prices Improve Energy Efficiency?," CESifo Working Paper Series 10944, CESifo.

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    More about this item

    Keywords

    modern manufacturing capital investments productivity France; modern manufacturing capital; investments; productivity; France;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • 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
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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