Modern manufacturing capital, labor demand and product market dynamics: evidence from France

Aghion, Philippe ORCID: 0000-0002-9019-1677, Antonin, Celine, Bunel, Simon and Jaravel, Xavier Laurent (2023) Modern manufacturing capital, labor demand and product market dynamics: evidence from France. CEP Discussion Papers (CEPDP1910). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We use comprehensive micro data in the French manufacturing sector between 1995 and 2017 to document the effects of a fall in the cost of investments in modern manufacturing capital, including modern automation technologies, on employment, wages, sales, prices, and business stealing. Causal effects are estimated with event studies and a shift-share IV design leveraging pre-determined supply linkages and productivity shocks across foreign suppliers of manufacturing capital. At all levels of analysis - plant, firm, and industry - the estimated impact of capital investments on employment is positive, even for unskilled industrial workers. Further-more, we find that capital investments lead to higher sales and exports, higher profits, and lower consumer prices, while wages and wage inequality remain unchanged. We estimate a positive industry-level employment response to manufacturing capital investments only in industries that are exposed to import competition, due to business-stealing across countries. Thus, typical investments in modern manufacturing capital lead to an increase in domestic labor demand and promote competitiveness in international markets.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2023 The Author(s)
Divisions:	Economics
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HF Commerce
JEL classification:	L - Industrial Organization > L0 - General > L00 - General
Date Deposited:	15 Jan 2024 17:06
Last Modified:	14 Sep 2024 04:42
URI:	http://eprints.lse.ac.uk/id/eprint/121340

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