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Innovation and Employment in Economic Cycles

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Abstract

This article explores the way economic cycles influence the relationship between innovation and employment in manufacturing industries. We investigate whether the ups and downs of cycles alter the possibility of exploiting technological opportunities and affecting patterns of job creation. A model that explains industries’ employment change by combining technology and demand is proposed; the empirical test is based on data on 21 manufacturing sectors from 1995 to 2007 for Germany, France, Italy, the UK, the Netherlands and Spain. Results show that, in upswings, employment change is affected by new products, exports and wage growth, while during downswings new processes contribute to restructuring and job losses.

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Notes

  1. For a review, see Pianta (2005). See Van Reenen (1997), Piva and Vivarelli (2005), Harrison et al. (2008), Hall et al. (2008), Bogliacino et al. (2012b) for studies at the firm level; Greenan and Guellec (2000), Evangelista and Savona (2003), Mastrostefano and Pianta (2009), Bogliacino and Pianta (2010), Bogliacino et al. (2012a) for the sectoral level of analysis.

  2. In order to allow comparability among years and countries, we have deflated the expenditure variables and scaled them by using employment in sectors.

  3. Monetary variables have been expressed at constant prices using sectoral deflators. In order to limit the distortion introduced by the use of OECD industry-level hedonic prices, sector 30 (office computing) has been deflated using the price index of the aggregate of the electrical and optical sector (30–33 sectors). All monetary variables have been previously expressed in euro. For the United Kingdom, the original figures provided in GBP millions have been transformed using the exchange rate expressed in PPP (Prices and purchasing power parities, Statistics in Focus 53, 2004).

  4. A number of studies has used the Pavitt taxonomy to analyse the variety of technological trajectories (for a review, see Archibugi, 2001).

  5. The rates of changes of each group are calculated as average values among sectors and countries. Data for Office, Accounting and Computing machinery industry (30, Nace Rev. 1) have not been considered in the descriptive analysis. This sector is characterized in different countries by strong fluctuations that distort the overall pattern; in terms of the number of employees, it represents about 1% of the total employment only.

  6. In Figure 2, innovative turnover from CIS 2 (1994–1996) is related to the rate of change of employment in 1996–2000; CIS 3 (1998–2000) to 2000–2003; CIS 4 (2002–2004) to 2003–2007. Rates of change of employment of each group are average values among sectors and countries.

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Acknowledgements

A preliminary version of this paper was presented at the international workshop ‘Crises, Institutions and Labour Market Performance: Comparing Evidence and Policies’ organised by EACES, EAEPE, AIEL, AISSEC and the University of Perugia, held in Perugia on 10 November 2011. We thank the participants, Josef Brada and Marcello Signorelli for their comments.

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Authors and Affiliations

  1. ISTAT, Italian National Institute of Statistics, Via Tuscolana 1782, 00173, Rome, Italy

    Matteo Lucchese

  2. Department of Economics Society Politics, University of Urbino, Via Saffi 42, Urbino (PU), 61029, Italy

    Matteo Lucchese & Mario Pianta

  3. Centro Linceo Interdisciplinare, Accademia Nazionale dei Lincei, Rome, Italy

    Mario Pianta

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  1. Matteo Lucchese
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  2. Mario Pianta
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Lucchese, M., Pianta, M. Innovation and Employment in Economic Cycles. Comp Econ Stud 54, 341–359 (2012). https://doi.org/10.1057/ces.2012.19

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