Does innovation stimulate employment? Evidence from China

Innovation and employment are important topics in emerging economies. This paper focuses on the impact of technological innovation on employment in China. Specifically, we examine the different impact of product and process innovation on employment and test the impact with data extracted from survey conducted by the World Bank. The results show that process innovation exerts a positive effect on employment while product innovation has a negative effect. Specifically, the positive effect on job creation comes from the increase in sales of old products, while the negative effect comes from the increase in productivity of new products. The impact of innovation differs across firms because of different labor skill structures. Further, we find that better-educated but less-skilled labor benefits more from the positive effect of process innovation and process innovation is a mediating variable for product innovation.