THE IMPACT OF INNOVATION ON EMPLOYMENT: FIRM- AND INDUSTRY-LEVEL EVIDENCE FROM ESTONIA Jaanika Meriküll   Working Papers of Eesti Pank No 1/2008

This paper investigates the implication of innovation on employment at the firm and industry levels. The paper contributes to the literature in two respects. First, it proceeds from the data of a catch-up country undergoing a very rapid economic development. Most of the empirical investigations use data from developed and technologically leading countries. The second contribution concerns the nature of the data in use; we develop a unique database merging the data of the Estonian Commercial Register with two consecutive Estonian Community Innovation Surveys (CIS), the CISIII for 1998-2000 and CISIV for 2002-2004. Our results coincide with the results on developed economies in the respect that innovation activity has a positive effect on employment and that product innovation has a stronger and a more positive employment effect. Both of these effects are consistent over firm and industry levels. This result is also confirmed by the insignificance of the spillover effects of an industry's innovation on employment by firms.
JEL Code: J23, O33, D21
Key words: innovation (technological change), employment, catch-up economy

* I would like to thank Prof. Karsten Staehr, Prof. Tiiu Paas, Aurelijus Dabušinskas, Tairi Rõõm, Dmitry Kulikov, Rasmus Kattai and Martti Randveer for their insightful comments and discussions. I also thank Jaan Masso who provided the commercial register data of Estonian enterprises. The author alone is responsible for any remaining errors and inconsistencies.

Author's e-mail address: Jaanika.Meriküll@mtk.ut.ee

The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank.

Contents

1. Introduction

2. Literature and background

2.1. Related literature

2.2. Innovation patterns of high- and middle-income countries

3. The labour demand function of firms

4. Data

5. Empirical results

5.1. Firm-level evidence

5.2. Industrial and regional spillover effects

5.3. Industry-level evidence

6. Final comments

References

Appendix 1. Selection of firm-level studies on technological change and employment

Appendix 2. Selection of sectoral-level studies on technological change and employment

The Impact of Innovation on Employment: Firm- and Industry-level Evidence from Estonia, Working Papers of Eesti Pank No 1/2008 (PDF*)

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