Innovation, Technical Change and the Labour Market

Abstract

This doctoral thesis consists of four papers. The two first papers are related to financial economics and the other two to labour economics. All four papers deal with microeconomics analysis of individuals and firms. Where the first two are from a firm's perspective and the two are from an individuals perspective. Moreover, all four papers underline the importance of innovation for productivity, competitiveness and economic growth. In the first essay we use German Community Innovation Survey to identify financially constrained firms. Contrary to previous studies we find that the relationship between financial constraints and firm size is inverted u-shaped and that it is the group of medium sized firms which has the largest funding gaps. This is explained by the fact that these firms have high innovation capabilities but at the same time face high cost of capital. Furthermore, we test if financial constraints have an impact on firm productivity growth. We find negative effects from funding gaps on productivity, but only for investment in tangible capital and not for innovation investments. The second essay investigates whether there has been a change in the productivity and funding mix of innovative Small and Medium-sized Enterprises (SMEs) post stricter bank regulations. Our result shows that the likelihood of using bank loans as a funding source has not changed for innovation investments nor for tangible investments after stricter capital regulations have been announced. On the other hand, sources such as subsidies have increased due to regulatory programs that have been implemented in the aftermath of the recent financial crisis. Furthermore, SMEs productivity has not changed post stricter bank regulations. Overall, the impact from different sources of funding on productivity is rather limited. The third essay explores firm formation by migrants with a STEM background. The result shows that native born STEM workers have a higher probability to form firms relative to migrants. Further categorization of migrants shows that refugees are more likely to become entrepreneurs than EU-labour migrants. Overall, entrepreneurial migrants have equal or higher predicted income in comparison to native born STEM entrepreneurs. The fourth essay analysis wage effects from changing work tasks using a tasked-based approach where workers are mapped in a two dimensional model classified by their cognitive and routine task content. The result shows clear signs of wage polarization. A switch from routine and manual tasks to non routine cognitive task yields an average wage premium of about 2-6%. More importantly, while the gap was 1-5% in the beginning of the period, it increased to 10-13% at the end of the period. The result suggest that adapting new production technology and innovations to complement analytical skills has a higher and increasing marginal productivity compared to technologies aimed to replace or complement routinized and manual work tasks. The period of this study is associated with several so-called breakthrough technologies such as, computerization, robotization, digitalization and the introduction of IT technology.

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