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Modern Manufacturing Capital, Labor Demand, and Product Market Dynamics: Evidence from France
[Capital industriel moderne, demande de travail et dynamique des marchés de produits : le cas de la France]

Author

Listed:
  • Philippe Aghion

    (INSEAD - Institut Européen d'administration des Affaires, LSE - London School of Economics and Political Science, CdF (institution) - Collège de France)

  • Céline Antonin

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Simon Bunel

    (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 - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris)

  • 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 pre-determined 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, 2023. "Modern Manufacturing Capital, Labor Demand, and Product Market Dynamics: Evidence from France [Capital industriel moderne, demande de travail et dynamique des marchés de produits : le cas de la France]," Sciences Po Economics Publications (main) hal-05354408, HAL.
    • Handle: RePEc:hal:spmain:hal-05354408
    Note: View the original document on HAL open archive server: https://insee.hal.science/hal-05354408v1
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    Cited by:

    1. is not listed on IDEAS
    2. Benmelech, Efraim & Zator, Michał, 2025. "Robots and firm investment," Journal of Financial Economics, Elsevier, vol. 174(C).
    3. Elodie Andrieu & John Morrow, 2024. "Can Firm Subsidies Spread Growth?," PSE Working Papers halshs-04747880, HAL.
    4. Kirill Borusyak & Peter Hull & Xavier Jaravel, 2025. "Design-based identification with formula instruments: a review," The Econometrics Journal, Royal Economic Society, vol. 28(1), pages 83-108.
    5. Michael T. Rauh, 2025. "Innovating Yourself Out of a Job," Journal of Industrial Economics, Wiley Blackwell, vol. 73(1), pages 31-69, March.
    6. Stefano Carattini & Hanwei Huang & Frank Pisch & Tejendra Pratap Singh, 2025. "Trade and the Scopes of Pollution: Evidence from China’s World Market Integration," CESifo Working Paper Series 12119, CESifo.
    7. David Autor & Caroline Chin & Anna Salomons & Bryan Seegmiller, 2024. "New Frontiers: The Origins and Content of New Work, 1940–2018," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 139(3), pages 1399-1465.
    8. Deng, Liuchun & Müller, Steffen & Plümpe, Verena & Stegmaier, Jens, 2024. "Robots, occupations, and worker age: A production-unit analysis of employment," European Economic Review, Elsevier, vol. 170(C).
    9. Elodie Andrieu & John Morrow, 2024. "Can Firm Subsidies Spread Growth?," PSE Working Papers halshs-04721319, HAL.
    10. Andrieu, Elodie & Morrow, John, 2024. "Can firm subsidies spread growth?," LSE Research Online Documents on Economics 126775, London School of Economics and Political Science, LSE Library.
    11. Kirill Borusyak & Peter Hull & Xavier Jaravel, 2025. "A Practical Guide to Shift-Share Instruments," Journal of Economic Perspectives, American Economic Association, vol. 39(1), pages 181-204, Winter.
    12. repec:ces:ceswps:_10944 is not listed on IDEAS
    13. Singer, Gregor, 2024. "Complementary inputs and industrial development: can lower electricity prices improve energy efficiency?," LSE Research Online Documents on Economics 122365, London School of Economics and Political Science, LSE Library.

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    Keywords

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    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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