Employment impacts of market novelty sales: evidence for nine European Countries

Abstract

This study investigates the impact of new market product (market novelty) sales on labour demand (employment). Based on a two-output cost function (market novelties and existing products) a relative employment equation is derived with the ratio of labour to material inputs as dependent variables. The relative labour demand model is estimated using biennial data for 25 industries, nine European countries and five time periods (2002-2010) or by use of a sizeclass dataset with broad industry groups. System GMM estimations accounting for endogeneity show that the turnover (sales) of market novelties (in relation to existing products) has a significant impact on relative employment in manufacturing industries. On average, an increase in the relative turnover of new market products by one percentage point is associated with a 1.6 per cent increase in the employment ratio. In contrast, employment in service industries does not benefit from new market products but instead from the intensity with which information and communication technology innovations are used, approximated by the proportion of broadband internet connected employees. When instead the size-class dataset is employed, it becomes clear that market novelties primarily drive employment in small firms.

Innovating with Limited Resources: The Antecedents and Consequences of Frugal Innovation

“…Future research could further examine these relationships. Moreover, frugal innovation is a subset of product innovation and such innovations are good not only for firms' performance but also for job generation, which is a crucial social aspect in emerging countries that needs further exploration [94].…”

Technological Innovations and Labor Demand Using Linked Firm-Level Data

“…One alternative is the structural model suggested by Harrison et al (2008Harrison et al ( , 2014, which differentiates the manufacturing efficiency of old and new products. Another is to base the equation on a multioutput cost function with two types of outputs: turnover from new (market novelties) or existing products (Falk and Hagsten 2018). A third approach commonly used is to specify a standard labor demand equation where employment is a function of wages, output, and dummy variables approximating product and process innovations (Bond and Van Reenen 2007;Van Reenen 1997).…”

“…The linking of different sources allows a broader set of variables than in the mainstream literature, the aggregation deals with both issues of disclosure and rotating datasets, while the slight drawback is the move from the average firm to the representative. An investigation of the relationship between new market product (market novelty) sales and labor demand (employment) in nine European countries will be used as an example (Falk and Hagsten 2018), completed with new alternative estimations. The rich dataset at hand allows the labor demand equation to be derived from the nonhomothetic CES cost function (Borjas and Van Ours 2010;Hamermesh 1993;Van Reenen 1997).…”

“…The two variable inputs are labor and total materials, including energy. With subscripts i for industry and t for time suppressed, the cost function is specified as follows (see Chambers 1988;Falk and Hagsten 2018):…”

The Role of Environmental Regulation and Technological Innovation in the Employment of Manufacturing Enterprises: Evidence from China

“…By using a dataset made of 879 large international firms observed for the period 2002-2010 and localized in USA, Japan, and Europe, Aldieri and Vinci [38] analyzed the extent to which the economic crisis may affect the sensitivity of employment with respect to their own innovation but also with respect to outside innovation, i.e., the R&D spillovers, in high-tech and low-tech industries. Falk and Hagsten [39] investigated the impact of new market product (market novelty) sales on labor demand (employment) by using biennial data for 25 industries, nine European countries, and five time periods (2002-2010), and the GMM estimations show that the turnover (sales) of market novelties (in relation to existing products) has a significant impact on relative employment in manufacturing industries, while employment in service industries does not benefit from new market products but instead from the intensity with which information and communication technology innovations are used. Piva and Vivarelli [40] discussed the economic insights on the employment impact of technological change covering both classical theories and updated theoretical and empirical analyses, and provided an empirical test based on longitudinal data covering manufacturing and service sectors over the 1998-2011 period for 11 European countries.…”