Arnoldshain Seminar XV
“The EU and Latin America Facing Globalization”
September 4 – 6, 2017

Peluffo Geronazzo, Adriana, Universidad de la Republica Uruguay, Does Innovation affect the Demand for Skills?
Technological innovation is expected to boost economic growth and to have a sizable impact on employment. Nevertheless, employment has been a major preoccupation in developing countries dealing with technical progress and trade liberalization. The kind of shifts in employment that innovation brings matters for the inequality debate. Increased inequality in developing countries has been associated with an increase in the skill premium prompted by globalization. The objective of this study is on the effect of innovation on labor demand. In particular, the absolute level of employment and the skills composition of the labor force. Thus, we test whether productivity enhancing innovation will increase the proportion of skilled workers and whether product innovation will increase the level of employment. The data for this study came from the Innovation Activities Surveys (Encuestas de Actividades de Innovación en la Industria – EAII) collected by the National Bureau of Research and Innovation (Agencia Nacional de Investigación e Innovación – ANII) for Uruguayan manufacturing firms over the 2000-2012 period. Our preliminary results for the random effect model show opposite results to what we expected, with a negative sign for skilled employment growth for product innovation. Nevertheless, due to endogeneity concerns we cannot take these results as conclusive, since there is an endogeneity issue it remains to estimate using instrumental variable methods to obtain consistent estimators. Keywords: Employment, Skilled Labor, Product Innovation, Process Innovation. JEL code: D2, J23, L1, O31, O33