2017/27 | LEM Working Paper Series | ||||||||||||||||
Technological catching-up, sales dynamics and employment growth: evidence from China's manufacturing firms |
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Giovanni Dosi and Xiaodan Yu |
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Keywords | |||||||||||||||||
Employment Growth, Demand, Product Innovation, Process Innovation, Export, China catching-up
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JEL Classifications | |||||||||||||||||
D22, J01, O33
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Abstract | |||||||||||||||||
This paper investigates the microeconomics of employment dynamics,
using a Chinese manufacturing firm-level dataset over the period
1998-2007. It does so in the light of a scheme of "circular and
cumulative causation", whereby firms' heterogeneous productivity gains
and sales dynamics, and innovation activities ultimately shape the
patterns of employment dynamics. Using firm's productivity growth as a
proxy for process innovation, our results show that the latter
correlates negatively with firm-level employment growth. Conversely,
relative productivity levels, as such a general proxy for the broad
technological advantages/disadvantages of each firm, do show positive
effect on employment growth in the long-run through replicator-type
dynamics. Moreover, firm-level demand dynamics play a significant role
in driving employment growth, which more than compensate the
labour-saving effect due to technological progress. Finally, and
somewhat puzzlingly, the direct effects of product innovation and
patenting activities on employment growth appear to be negligible.
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