INNOVATION AND EMPLOYMENT IN strongECONOMICstrong CYCLES”.pdf

ISSN 1974-4110 WP-EMS Working Papers Series in Economics, Mathematics and Statistics “INNOVATION AND EMPLOYMENT IN ECONOMIC CYCLES” • Mario Pianta, (U. Urbino) • Matteo Lucchese (U.Urbino) WP-EMS # 2012/3 Innovation and employment in economic cycles * ** Matteo Lucchese and Mario Pianta , Abstract This article explores the way economic cycles influence the relationship between innovation and employment in manufacturing industries. We investigate whether the ups and downs of cycles alter the possibility of exploiting technological opportunities and affecting patterns of job creation. A model that explains industries’ employment change by combining technology and demand is proposed; the empirical test is based on data on 21 manufacturing sectors from 1995 to 2007 for Germany, France, Italy, the UK, the Netherlands and Spain. Results show that, in upswings, employment change is affected by new products, exports and wage growth, while during downswings new processes contribute to restructuring and job losses. Keywords: Innovation, Cycles, Employment, Demand JEL classification: L6, J20, O30,E32 * Istat and University of Urbino, matteo.lucchese@uniurb.it ** University of Urbino, Centro Linceo Interdisciplinare, Accademia Nazionale dei Lincei, mario.pianta@uniurb.it 1