Impacts of innovation, export, and other factors on firm employment growth in Chinese manufacturing industries

Abstract

This article presents empirical evidence on the impacts of product innovation, export, and other important factors on employment growth in Chinese manufacturing industries over the period 2000–2006. The results of our analysis show that the overall demand effect of firms’ output growth on their average yearly employment growth amounts to 7.0%, of which 3.5%, 1.2%, 1.6%, and 0.7% correspond to the output growth of, respectively, domestic-old, export-old, domestic-new and export-new products. The displacement effect from process and organizational innovations, as measured by firms’ productivity efforts to catch up with industry regional productivity frontiers, accounts for a 5.4% average reduction of yearly employment growth. We also observe a trade-off between growth of productivity and growth of employment, which could have been on average higher by 2% for productivity (16.8% instead of 14.8%) and lower by 2% for employment (1.4% instead of 3.4%).