by jacques mairesse † with yanyun zhao ‡ and feng zhen §

Employment Growth and Product Innovation in China:

A Firm Level Comparison across Provinces and City Districts

By Jacques Mairesse †

with Yanyun Zhao‡ and Feng Zhen§

† INSEE-CREST (Paris, France), UNU-MERIT (Maastricht University, Netherlands) and NBER (USA).

[email protected]

‡ Renmin University of China, No. 59 Zhongguancun Avenue, Beijing, China

§ Central University of Finance and Economics (Beijing, China) and UNU-MERIT

(Maastricht University, Netherlands)

Beijing Metropolitan International Statistics Forum 2008

Beijing, 20 October 2008 2

OUTLINE

• Innovation and Employment

• Data and Descriptive Statistics

• Empirical Framework and Estimates

• Employment Growth Decomposition

• Perspectives and Data Requirements for Further Analysis


Innovation and Employment

• Innovation and its importance in world development

• Innovation and employment

• Assessing the impact of innovation on employment at the firm level: positive or negative? large or small?

• Present analysis for four industries: Textile, Wearing Apparel, Transport Equipment, Electronic Equipment, and three recent years 2004-2006


Data and Descriptive Statistics

• NBS’s annual industry survey of all State-owned firms, and non-state-owned firms with sales higher than 5 million RMB Yuan (i.e., Limited-liability, Share-holding, Private, Hong-Kong, Macao and Taiwan, Foreign)

• Data: 2004-2006, 4 industries: Textile, Wearing appeal,

Transport Equipment, Electronic Equipment

• Cleaning: Sales>=5 million, Employment>=10

Growth rate of Fixed assets, Sales, Labor [5, 95]

After that, keep provinces with number of firms>2

• Coverage about 60% in four industries, varying from about 50% to 70% across provinces


Descriptive Statistics

• 2004-2006 Growth rate of labor in Textile, Wearing Apparel, Transport Equipment, Electronic Equipment:

- China: 5.9 % ; 5.4 %; 8.8 %;13.8 %

- Beijing: 5.4 % ; 3.3 %; 7.3 %;10.1 %

• 2004-2006 Corresponding Growth rate of productivity:

- China: 29.6% ; 27.1%; 27.2%;27.8%

- Beijing: 17.8% ; 17.4%; 19.1%; 21.9%



• 2004-2006 Growth rate of Output in Textile, Wearing Apparel, Transport Equipment, Electronic Equipment:

- China: 35.5 % ; 32.5 %; 36.0 %;41.6 %

- Beijing: 23.3 % ; 20.7 %; 24.2 %; 32.0 %

• 2006 percentage Shares of new products introduced in 2004-2006 (NPPO):

- China: 5.9% ; 2.8%; 6.5%;10.3%

- Beijing: 9.2% ; 5.1%; 9.6%; 54.5%



• 2004-2006 Growth rate of Output in Textile, Wearing Apparel, Transport Equipment, Electronic Equipment for product innovating firms (all products: “new” and “old”):

- China: 40.3 % ; 40.0 %; 37.2 %; 39.5 %

- Beijing: 23.3 % ; 20.7 %; 24.2 %; 32.0 %

• 2004-2006 Corresponding Growth rate of output for product non-innovating firms (“old products”):

- China: 35.1 % ; 32.0 %; 35.7 %; 42.1 %

- Beijing: 23.3 % ; 20.7 %; 24.2 %; 32.0 %



• 2004-2006 Growth rate of Output in Textile, Wearing Apparel, Transport Equipment, Electronic Equipment for product innovating

firms (“new products” only): g2-new = (NPPO).(1+g-all)

- China: 51.6 % ; 71.9 %; 57.2 %; 90.1 %

- Beijing: … % ; … %; … %; … %

• 2004-2006 Growth rate of Output for product innovating firms

(“old products” only): g1-old = (g-all) - (g2-new)

- China: -11.2 % ; -31.9 %; -20.0 %; -50.6 %

- Beijing: … % ; … %; … %; … %


Average 2004-2006 growth rates of Employment by provinces

-15%

-10%

-5%

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Textile Wearing Apparel Transport Equipment Electronic Equipment


Average growth rates 2004-2006 of Output by provinces

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Average growth rates 2004-2006 of Productivity by provinces

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Average percentage share of “New Products” (NPPO)

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* Note: The proportion of electronic equipment in Beijing is 54.5%, too high to be included in the graph.


Empirical Framework…

12 22 11 12 11 22

11 11 11

L L L L L L LL L L L

12 1112 11

1111

2211

1122

L Y Y Y

YL Y

Labor growth by old products Labor growth by new products

(1)

(2)

: Output growth of old products : Output growth of new products

: Relative efficiency of old and new products

1g 2g

0l


Empirical Framework…

0 01 1 0 20ˆ ˆ ˆ ˆˆ ˆ_ k kj j

jl l

k ll g l g gown ind vreg

Region Dummies

Ownership Dummies

Sub-industry Dummies

(3) Regression model


…and Estimates

Output Growth for 0.832 *** 0.872 *** 0.850 *** 0.873 ***

New Products (g2) (0.018 ) (0.024 ) (0.018 ) (0.014 )


New Products (g2) (0.133 ) (0.299 ) (0.067 ) (0.069 )


New Products (g2) (0.123 ) (0.266 ) (0.064 ) (0.067 )

Dependent: Growth of Employment (l_g1)

Textile Wearing Apparel

Transport Equipment

Electronic Equipment

OLS

Root MSE 0.466 0.476 0.438 0.463

IV_1

Root MSE 0.466 0.476 0.439 0.497

IV_2

Root MSE 0.470 0.486 0.442 0.501

Number of Firms 12721 6199 5656 4184


Employment Growth Decomposition

0 0 0 2 1 12 20ˆ ˆ ˆ ˆ[1 ( 0) ˆ( )ˆ (0] )k k l l

k lj j

jl ownreg in I g gd I g g g v

(4) Employment decomposition

Average specific trend

Growth due to non-innovators

Growth due to product innovators

Old products

New products


Employment Growth Decomposition (log.)

Industry / Country Textile Wearing Apparel

Transport Equipment

Electronic Equipment

France Germany Spain UK Italy

Employment growth 5.9 5.4 8.8 13.8 8.3 5.9 14.2 6.7 2.5

Average specific trend -30.2 -28.3 -27.6 -32.1 -1.9 -7.5 -5.7 -5 -5.6

Growth due to non-innovators 32.2 30.0 29.3 33.9 4.7 5.4 12.5 7.9 5.8

Growth due to product innovation 3.9 3.6 7.1 12.0 5.5 8.0 7.4 3.9 2.4

of which: old product -0.9 -2.0 -3.6 -9.8 - - - - -

new product 4.8 5.6 10.7 21.8 - - - - -

China (2004-2006) European Manufacturing (1998-2000)

Number of Observations 12721 6199 5656 4184 4631 1319 4548 2493 4618


-120%-100%-80%-60%-40%-20%

0%20%40%60%80%

100%120%

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Productivity trend Non-Inno Inno-Old Inno-New

Employment Growth Decomposition__Electronic

* After cleaning, the number of firms in these provinces are less than 20, and not included in the estimation .

* * * * * * *


Some references

• Harrison, R., J. Jaumandreu, J. Mairesse and B. Peters (2008), "Does Innovation Stimulate Employment? A Firm-level Analysis Using Comparable Micro-data from four European countries", NBER WP 14216, August 2008.

• Hall, B.H., F. Lotti and J. Mairesse (2008), "Employment, Innovation, and Productivity:Evidence from Italian Micro-data", Industrial and Corporate Change, 17 (4), pp. 813-839.

• Ping He, Jinchang Qian, Nannan Lundin, and Fredrick Sjöholm (2008), "Technology Development and Job Creation in China’s Manufacturing Sector", Mimeo presented at the 2d MEIDE Conference, Renmin University, Beijing, April 21-23, 2008.

• …


Perspectives and Data requirements for Further Analysis

• Process innovation

• Employment by skills

• Output prices

• Wage differentials

• Other demand shifters: export

• From firm level analysis to macro analysis: survival, strategic behavior from competitors, ...

• …and more


Last but not Least

THANK YOU!Jacques Mairesse (INSEE-CREST, UNU-MERIT and NBER)

E-mail: [email protected]

“Not everything that can be counted counts, and not everything that counts can be counted.”

Albert EINSTEIN

by jacques mairesse † with yanyun zhao ‡ and feng zhen §

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