DP15815 Techies, Trade, and Skill-Biased Productivity

Author(s): James Harrigan, Ariell Resheff, Farid Toubal
Publication Date: February 2021
Keyword(s): Globalization, ICT, labor demand, Outsourcing, productivity, R&D, skill augmenting, Skill bias, STEM skills, techies
JEL(s): D2, D24, F1, F16, F6, F66, J2, J23, J24, O52
Programme Areas: Labour Economics, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15815

We study the impact of firm-level choices on ICT, R&D, exporting and importing on the evolution of productivity, its bias towards skilled workers, and implications for labor demand. We use a novel measure of firm-level R&D and ICT adoption: employment of "techies" who perform these tasks. We develop methodology for estimating nested-CES production functions and for measuring both Hicks-neutral and skill-augmenting technology differences at the firm level. Using administrative data on French firms we find that techies, exporting and importing raise skill-biased productivity. In contrast, only ICT techies raise Hicks-neutral productivity. On average, higher firm-level skill biased productivity hardly affects low-skill employment, even as it raises relative demand for skill, due to the cost-reducing effect. ICT accounts for large increases in aggregate demand for skill, mostly due to the effect on firm size, less so through within-firm changes. Exporting, importing, and R&D have smaller aggregate effects.