Innovation and employment in Italian manufacturing industry

In this paper the effects of innovation on employment are investigated in the case of Italian manufacturing. First, an overview of the relationship between technology and employment is provided, focusing on three key questions: (i) the role of structural change across sectors of the economy; (ii) the contrasting roles of product and process innovations; (iii) the complementary roles played by embodied and disembodied aspects of technical change. Second, the broad relationships between changes in value added, employment, investment and technology indicators at the sectoral level are investigated, showing the peculiarity of Italy within the group of the more advanced countries. Employment growth in Italian industry turns out to be inversely related to increases in productivity. Third, firm-level data drawn from the CNR-ISTAT innovation survey are used, showing that innovations have had clear labour-displacing effects and have been accompanied by a significant increase in the utilisation of fixed capital. The overall negative impact of technology on employment in Italian manufacturing is found to be caused by the dominant role of process innovations and embodied technical change in firms' innovative activities. An opposite labour-increasing pattern can be found in some sectors characterised by higher design and engineering intensities and higher percentages of product innovations.