Do rising labour costs promote technology upgrading? A novel theoretical hypothesis of an inverted U-shaped relationship

Feng-Wen Chen, Jingwei Xu, Jiang Wang, Zhilong Li and Yongqiu Wu

Structural Change and Economic Dynamics, 2023, vol. 66, issue C, 327-341

Abstract: Although many studies have examined the impact of rising labour costs on enterprises’ innovation, there remains a lack of consensus on this issue. Combining the induced innovation hypothesis and the impeded innovation perspective, this study constructs a theoretical model to comprehensively investigate the mechanism of the effect of rising labour costs on technology upgrading. The theoretical model demonstrates that rising labour costs increase technology upgrading ‘impetus’ but reduce ‘capability’. Finally, an inverted U-shaped relationship between rising labour costs and technology upgrading is revealed. Empirical evaluations using data from Chinese listed companies confirm the theoretical hypotheses. This study also investigates the moderating effect of market position, wherein firms with low competitive positions have greater curvature. The results provide new explanations for the theoretical debate and practical evidence, with significant implications for emerging markets regarding the transition from a low-cost labour development model to an innovation-driven growth model.

Keywords: Labour costs; Technology upgrading; Financing constraints; Market positions (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0954349X23000826
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:66:y:2023:i:c:p:327-341

DOI: 10.1016/j.strueco.2023.05.011

Access Statistics for this article

Structural Change and Economic Dynamics is currently edited by F. Duchin, H. Hagemann, M. Landesmann, R. Scazzieri, A. Steenge and B. Verspagen

More articles in Structural Change and Economic Dynamics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().