The impact of foreign technological innovation on domestic employment via the industry mix

This paper analyses how differences in the industry composition of British local labour markets moderate the impact of foreign technological competition in manufacturing on domestic employment, both overall and across subsamples of workers with different skill levels (high, intermediate and low). To this scope, it exploits both variations across industries in the exposure to the introduction of new technologies, and information on how such industries are combined in shaping the industrial structure of each place. The analysis shows that places that specialise in industries undergoing substantial technological competition due to foreign innovation experience a reduction in total employment that is 4.5% larger than places less exposed based on their initial industry mix. This negative performance is mainly explained by a decrease in the employment opportunities for intermediate-skilled workers. Limited support is found for successful adaptation trajectories over time across British local labour markets.