Emily Farchy, Giulia Ajmone-Marsan, Karen Maguire, Joaquim Oliveira Martins, William Tompson, OECD
…the trade-off between innovation and job creation which may exist in national economies can be turned into a complementarity relationship, where innovation and job creation go hand in hand, providing that the policies are tailored for each region.
Innovation is one of the primary drivers of growth within OECD countries. However, its net effect on job creation is unclear. This has generated widespread concern that technological innovations have disproportionately served high-skilled workers, what is known as skill-biased technological change. This paper argues that the trade-off between innovation and job creation which may exist in national economies can be turned into a complementarity relationship, where innovation and job creation go hand in hand, providing that the policies are tailored for each region. These ‘place-based’ policies can take advantage of special conditions that are typical for each region in a way that is not possible for national policies to do. We start by looking at the existing evidence on how innovation destroys jobs. The economic literature is still a bit inconclusive, but it seems that product innovation tends to be the most job friendly. We then provide evidence on how patterns of innovation and employment vary starkly from region to region and depend heavily upon multiple interactions within the regional context. In particular, the capacity for a regional economy to respond to innovation and harness its potential to foster employment depends critically on different forms of worker mobility: i) geographical mobility – to the extent that workers can migrate to adjust to changing patterns of productivity; ii) and, skill mobility – such that workers are able to take advantage of new productive opportunities as they arise. The design of policies that accounts for these ‘place-based’ realities is likely to generate a complementarity between innovation and jobs at the regional level. To conclude, we argue that these policies need to have at least three characteristics: i) a focus on relatively immobile and/or region-specific sectors; ii) an ability to exploit the complementarities across different types of policies; and, iii) alignment of objectives across governments of different scales and sectors.