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The IMPACTS of technological change on employment: Evidence from OECD countries with panel data analysis

Fatih Ayhan and Onuray Elal

Technological Forecasting and Social Change, 2023, vol. 190, issue C

Abstract: Technological changes are at the center of numerous inquiries about their various effects on different economies. Subsequent transformations in production methods and labor markets stand out broadly among these researches. Technological changes reduce unit costs, enable productions to be conducted with less effort, and increase productivity in productions, whereas the same changes cause the substitution of laborers with machines, driving them out of their employment, and therefore, increasing the number of people unemployed. Given that a consensus about the effects of technology on labor markets hasn't been reached in the existing economic literature, it becomes a requirement to conduct further examinations regarding the interaction between technology and labor markets. To further these examinations, the effects of technological changes on labor markets are set as the aim and therefore, tested empirically to evaluate this empirical objective in a one-way fixed effects model for 30 OECD countries with an annual data set between 2009 and 2018. Based on the findings of the one-way fixed effects model estimated by the Driscoll-Kraay estimator, technological changes induced by patent applications are labor-destructive, whereas technological changes induced by research and development expenditures are positive, yet insignificant on employment. Additionally, gross domestic product and trade openness turn out labor-friendly. The findings set a sound motivator for policymakers about why they should provide more opportunities for workers to increase their flexibility to adapt to technological change and update their skill sets for new forms of production, which also imposes the fact that education and vocational training programs should be expanded and developed to be compatible with new technologies.

Keywords: Technology; Employment; Panel analysis; Driscoll Kraay; Labor markets (search for similar items in EconPapers)
JEL-codes: C23 E20 O30 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.techfore.2023.122439

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