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Employment Effect of Innovation

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Abstract
The present paper estimates and decomposes the employment e?ect of innovation by R&D intensity levels. Our micro-econometric analysis is based on a large international panel data set from the EU Industrial R&D Investment Scoreboard. Employing ?exible semi-parametric methods – the generalised propensity score – allows us to recover the full functional relationship between the R&D investment and ?rm employment, and to address important econometric issues, which is not possible in the standard estimation approach used in the previous literature. Our results suggest that modest innovators do not create and may even destruct jobs by raising their R&D expenditures. Most of the jobs in the economy are created by innovation followers: increasing innovation by 1% may increase employment up to 0.7%. The job creation e?ect of innovation reaches its peak when the R&D intensity is around 100% of the total capital expenditure, after which the positive employment e?ect declines and becomes statistically insigni?cant. Innovation leaders do not create jobs by further increasing their R&D expenditures, which are already very high.

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  • d'Artis Kancs & Boriss Siliverstovs, 2017. "Employment Effect of Innovation," KOF Working papers 17-428, KOF Swiss Economic Institute, ETH Zurich.
    • Handle: RePEc:kof:wpskof:17-428
    DOI: 10.3929/ethz-a-010852605
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    Cited by:

    1. Kancs, d’Artis & Siliverstovs, Boriss, 2016. "R&D and non-linear productivity growth," Research Policy, Elsevier, vol. 45(3), pages 634-646.
    2. d’Artis Kancs & Boriss Siliverstovs, 2020. "Employment effect of innovation," Empirical Economics, Springer, vol. 59(3), pages 1373-1391, September.
    3. Durmuş Çagri Yildirim & Seda Yildirim & Seyfettin Erdogan & Tugba Kantarci, 2022. "Innovation—Unemployment Nexus: The case of EU countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1208-1219, January.
    4. Olga Ivanova & d'Artis Kancs & Dirk Stelder, 2009. "Modelling Inter-Regional Trade Flows: Data and Methodological Issues in Rhomolo," EERI Research Paper Series EERI RP 2009/31, Economics and Econometrics Research Institute (EERI), Brussels.
    5. Francesco Di Comite & D'Artis Kancs & Wouter Torfs, 2015. "Macroeconomic Modelling of R&D and Innovation Policies," JRC Research Reports JRC89558, Joint Research Centre.
    6. Chee‐Hong Law & Siong Hook Law, 2024. "The non‐linear impacts of innovation on unemployment: Evidence from panel data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 402-424, January.
    7. Van Roy, Vincent & Vértesy, Dániel & Vivarelli, Marco, 2018. "Technology and employment: Mass unemployment or job creation? Empirical evidence from European patenting firms," Research Policy, Elsevier, vol. 47(9), pages 1762-1776.
    8. Mario Coccia, 2018. "Optimization in R&D intensity and tax on corporate profits for supporting labor productivity of nations," The Journal of Technology Transfer, Springer, vol. 43(3), pages 792-814, June.

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    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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