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Employment Effect of Innovation

d'Artis Kancs and Boriss Siliverstovs

No 2015-07, JRC Working Papers on Corporate R&D and Innovation from Joint Research Centre (Seville site)

Abstract: The present paper estimates and decomposes the employment effect of innovation by R&D intensity levels. Our microeconometric analysis is based on a large international panel data set from the EU Industrial R&D Investment Scoreboard. Employing flexible semi-parametric methods - the generalised propensity score - allows us to recover the full functional relationship between R&D investment and firm employment, and to address important econometric issues, which is not possible in the standard estimation approach used in the previous literature. Our results suggest that modest innovators do not create and may even destruct jobs by raising their R&D expenditures. Most of the jobs in the economy are created by innovation followers: increasing innovation by 1% may increase employment up to 0.7%. The job creation effect of innovation reaches its peak when R&D intensity is around 100% of the total capital expenditure, after which the positive employment effect declines and becomes statistically insignificant. Innovation leaders do not create jobs by further increasing their R&D expenditures, which are already very high.

Keywords: Innovation; R&D investment; causal inference; semi-parametric; employment; job creation; GPS (search for similar items in EconPapers)
JEL-codes: C14 C21 F23 J20 J23 O30 O32 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-eur, nep-ino, nep-sbm and nep-tid
Date: 2015-07
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Working Paper: Employment Effect of Innovation (2019) Downloads
Working Paper: Employment Effect of Innovation (2017) Downloads
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