New Evidence on the Effect of Technology on Employment and Skill Demand

Hirvonen JohannesStenhammar AapoTuhkuri Joonas

Abstract

We present novel evidence on the effects of advanced technologies on employment, skill demand, and firm performance. The main finding is that advanced technologies led to increases in employment and no change in skill composition. Our main research design focuses on a technology subsidy program in Finland that induced sharp increases in technology investment in manufacturing firms. Our data directly measure multiple technologies and skills and track firms and workers over time. We demonstrate novel text analysis and machine learning methods to perform matching and to measure specific technological changes. To explain our findings, we outline a theoretical framework that contrasts two types of technological change: process versus product. We document that firms used new technologies to produce new types of output rather than replace workers with technologies within the same type of production. The results contrast with the ideas that technologies necessarily replace workers or are skill biased.

Publication info

Research group
Labour market and education
Series
ETLA Working Papers 93
Date
11.04.2022
Keywords
Technology, Labor, Skills, Industrial policy
ISSN
2323-2420, 2323-2439 (Pdf)
JEL
J23, J24, O33
Pages
134
Language
English