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

Aghion, Philippe, 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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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:
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: 16 Jan 2024 15:15

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