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Modern Manufacturing Capital, Labor Demand and Product Market Dynamics: Evidence from France

Author

Listed:
  • P. AGHION

    (Insead, College de France et London School of Economics)

  • C. ANTONIN

    (OFCE - Sciences Po)

  • S. BUNEL

    (Banque de France et Paris School of Economics)

  • X. JARAVEL

    (London School of Economics)

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

  • P. Aghion & C. Antonin & S. Bunel & X. Jaravel, 2023. "Modern Manufacturing Capital, Labor Demand and Product Market Dynamics: Evidence from France," Documents de Travail de l'Insee - INSEE Working Papers 2023-12, Institut National de la Statistique et des Etudes Economiques.
    • Handle: RePEc:nse:doctra:2023-12
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    Cited by:

    1. Elodie Andrieu & John Morrow, 2024. "Can Firm Subsidies Spread Growth?," PSE Working Papers halshs-04747880, HAL.
    2. 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.
    3. 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.
    4. Elodie Andrieu & John Morrow, 2024. "Can Firm Subsidies Spread Growth?," PSE Working Papers halshs-04721319, HAL.
    5. 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.
    6. 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.
    7. repec:ces:ceswps:_10944 is not listed on IDEAS
    8. Michael T. Rauh, 2025. "Innovating Yourself Out of a Job," Journal of Industrial Economics, Wiley Blackwell, vol. 73(1), pages 31-69, March.
    9. 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).
    10. 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.

    More about this item

    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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