The Impact of Productivity Growth on Employment: Crowding Out Effect or Spillover Effect?

Abstract

Abstract: Productivity growth can promote the changes of the nature of work, and further affect the quantity and structure of employment. This paper conducts an empirical study based on a three-dimensional panel data model and the data of 56 industries in 43 countries from 2000 to 2014. The results show that productivity growth may have a negative influence on the total employment, but it is relatively slight. The productivity growth has a crowding out effect on the employment of the same industry but a spillover effect on other industries. The findings of further study show that the impact of the improvement of productivity on the employment is not only restricted by human capital, but also presents multi-dimensional heterogeneity. The improvement of productivity in such industries as information technology, education and public services has a positive spillover effect, while the excessive prosperity of the financial industry and the real estate industry has a significant crowding out effect. The overall impact of the improvement of productivity on employment in developing countries is greater than that in developed countries. During the period of post financial crisis, both the crowding out effect in the industries with productivity growth and the cross-industry spillover effect are somewhat weakened. The improvement of productivity will not increase employment, the reason is that its negative direct effect has a strong counteracting effect on the positive spillover effect.

Key words: productivity, aggregate employment, crowding out effect, spillover effect

CLC Number:

F062.9

WEI Xi-ye, GUO Dong-jie. The Impact of Productivity Growth on Employment: Crowding Out Effect or Spillover Effect?[J]. Contemporary Finance & Economics, 2022, 0(4): 15-27.

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