Job creation, technological innovation and adjustment costs

This paper examines the impact of technological change on net job creation. Innovation (by a company or its rivals) can affect many dimensions of a firm’s employment decision and we distinguish between three: changes due to higher output, changes due to shifting factor intensities and changes in the adjustment costs of firms. The parameter estimates from a strucural labour demand model suggest that firms with a higher stock of innovations face lower adjustment costs than less technologically progressive firms. There is no significant capital deepening effect from innovation, nor spillover effects on employment from innovations elsewhere in the firm’s industry.