Digital Technology Innovation and Corporate Labor Cost Stickiness

Siyuan Liu ()
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Siyuan Liu: Central University of Finance and Economics, School of Information

A chapter in Proceedings of the 2026 4th International Conference on Digital Economy and Management Science (CDEMS 2026), 2026, pp 121-134 from Springer

Abstract: Abstract Using data on Chinese A-share listed firms from 2009 to 2022, this paper examines whether digital technology innovation affects labor cost stickiness. To do so, it constructs a firm-level measure of digital technology innovation based on patent applications matched to official digital-economy industry classifications. The results show that digital technology innovation significantly increases labor cost stickiness by amplifying the asymmetry of firms’ labor-demand adjustment over expansions and contractions. This finding remains robust to instrumental-variable estimation and a wide range of robustness checks. Mechanism analyses indicate that the effect operates through stronger economies of scale and higher labor adjustment costs associated with skill upgrading and a larger skill premium. Further heterogeneity analyses show that the effect is more pronounced among labor-intensive firms, firms closer to the digital technological frontier, and firms operating in more competitive markets.

Keywords: Digital technology innovation; Labor cost stickiness; Skill premium; Economies of scale (search for similar items in EconPapers)
Date: 2026
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DOI: 10.2991/978-94-6239-699-9_15

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