Winners and Losers of Technology Grants: Evidence on Jobs and Skills

Johannes Hirvonen, Aapo Stenhammar and Joonas Tuhkuri
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Johannes Hirvonen: Northwestern University

No 2504, RF Berlin - CReAM Discussion Paper Series from Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM)

Abstract: Industrial policies are widespread, but evidence on their workforce effects remains limited. We present novel evidence on the impact of EU technology subsidies on employment and skill demand in Finnish SMEs, 1994–2018. The subsidies fund new machinery, including robots and CNC machines. Comparing closely matched grant winners and losers, we find that receiving a grant increased employment without changing skill composition. Leveraging application text data and machine learning, we match firms, analyze their plans, and show that subsidies primarily supported expansion, such as launching new products, rather than automating work. In contrast, analysis of a broader sample of manufacturing firms outside the program reveals that IT investments are more strongly associated with skill upgrading than machinery investments, suggesting that different technologies may impact jobs differently. Our findings indicate that machinery grants can create opportunities for non-college-educated workers.

Keywords: Industrial Policy; Subsidies; Technological Change; Labor Demand; Skills (search for similar items in EconPapers)
JEL-codes: H25 J23 J24 O25 O33 (search for similar items in EconPapers)
Date: 2025-02
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Persistent link: https://EconPapers.repec.org/RePEc:crm:wpaper:2504

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