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Innovation and jobs: evidence from manufacturing firms

  • Garcia, Angel
  • Jaumandreu, Jordi
  • Rodriguez, Cesar

This paper is aimed at structurally assessing the employment effects of the innovative activities of firms. We estimate firm level displacement and compensation effects in a model in which the stock of knowledge capital raises firm relative efficiency through process innovations and firm demand through product innovations. Displacement is estimated from the elasticity of employment with respect to innovation in the (conditional or Hicksian) demand for labour. Compensation effects are estimated from a firm-specific demand relationship. We also assess the enlargement and weakening of these effects due to firm agents’ behaviour aimed at appropriating innovation rents. We find that the potential employment compensation effect of process innovations surpasses the displacement effect, both in the short and long run (when competitors react), and that product innovation doubles the expanding impact by unit of expenditure, but also that agents’ behaviour can seriously reduce these effects. The actual elasticity of employment to knowledge capital is estimated, however, not far from unity, while “passive” productivity growth is suggested to have null or negative employment effects.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1204.

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Date of creation: 2004
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Handle: RePEc:pra:mprapa:1204
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  1. Bruno Crepon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation, and Productivity: An Econometric Analysis at the Firm Level," NBER Working Papers 6696, National Bureau of Economic Research, Inc.
  2. Stephen Machin & John Van Reenen, 1998. "Technology and changes in skill structure: evidence from seven OECD countries," IFS Working Papers W98/04, Institute for Fiscal Studies.
  3. Nickell, S & Vainiomaki, J & Wadhwani, S, 1994. "Wages and Product Market Power," Economica, London School of Economics and Political Science, vol. 61(244), pages 457-73, November.
  4. Nickell, S. & Komg, P., 1989. "Technical Progress And Jobs," Papers 366, London School of Economics - Centre for Labour Economics.
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  6. Hall, Bronwyn H. & Mairesse, Jacques, 1995. "Exploring the relationship between R&D and productivity in French manufacturing firms," Journal of Econometrics, Elsevier, vol. 65(1), pages 263-293, January.
  7. Nickell, S. & Kong, P., 1989. "Demand And Employment," Papers 367, London School of Economics - Centre for Labour Economics.
  8. Lucy Chennells & John Van Reenen, 1998. "Establishment Level Earnings, Technology And The Growth Of Inequality: Evidence From Britain," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 5(2-4), pages 139-164.
  9. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
  10. Aguirregabiria, Victor & Alonso-Borrego, Cesar, 2001. "Occupational structure, technological innovation, and reorganization of production," Labour Economics, Elsevier, vol. 8(1), pages 43-73, January.
  11. Doms, Mark & Dunne, Timothy & Roberts, Mark J., 1995. "The role of technology use in the survival and growth of manufacturing plants," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 523-542, December.
  12. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, June.
  13. Van Reenen, John, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U.K. Companies," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 195-226, February.
  14. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
  15. Arellano, Manuel & Honore, Bo, 2001. "Panel data models: some recent developments," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 53, pages 3229-3296 Elsevier.
  16. Miguel A. Delgado & Jordi Jaumandreu & Ana Martín Marcos, 1999. "Input cost, capacity utilization and substitution in the short run," Spanish Economic Review, Springer, vol. 1(3), pages 239-262.
  17. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July.
  18. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  19. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 283-300.
  20. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  21. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
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  23. Van Reenen, John, 1997. "Employment and Technological Innovation: Evidence from U.K. Manufacturing Firms," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 255-84, April.
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