Worker- and Firm-Level Effects of an Outsourcing Ban

Cigdem Ekiz (), Eren Gurer () and Erol Taymaz ()
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Cigdem Ekiz: UNU-MERIT, Maastricht University , UNU-MERIT, Maastricht, the Netherlands
Eren Gurer: Department of Economics, Middle East Technical University, Ankara, Turkiye
Erol Taymaz: Department of Economics, Middle East Technical University, Ankara, Turkiye

No 2604, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: We examine how innovation shapes firm-level workforce dynamics using rich administrative data from Türkiye, a developing economy characterized by medium-technology, incremental innovation. We find that patent-based innovation increases both firm size and average daily wages, with the largest employment gains among workers earning just above the median wage. To uncover the mechanisms behind these outcomes, we construct worker transition matrices. Relative to comparable non-innovative firms, innovative firms (i) retain incumbent workers at higher rates, particularly at the top of the wage distribution, (ii) promote retained workers into higher wage bins more frequently, and (iii) hire more new workers, disproportionately into higher wage bins. Finally, occupational composition analysis shows that employment growth is concentrated among technical and production occupations, consistent with the medium-technology, incremental nature of innovation in our sample.

Keywords: innovation; patents; wages; employment; worker transitions (search for similar items in EconPapers)
JEL-codes: J21 J31 O31 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2026-09, Revised 2026-09
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Persistent link: https://EconPapers.repec.org/RePEc:met:wpaper:2604

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