Innovation-Unemployment Nexus: The case of EU countries

Abstract

In order to achieve a sustainable growth and development process in a globalised competitive environment, the effect of monitoring the technological developments of the national economies is a necessity. Innovation, shown as a cause of technological developments, contributes to the transformation of technology into social and economic benefits. Innovation changes the structure of employment. However, there is no consensus in the literature about how innovation affects employment. Some suggest that technological innovations will lead to an increase in unemployment as a result of the substitution of machines instead of labour. The others state that technological innovations can improve the working life and create a reducing effect of unemployment as a result of every technological innovation creating their own fields of work. The aim of this study is to examine the effects of innovation on unemployment. The data of 12 EU countries with high and relatively low level of innovation were analysed with the panel threshold model for the period of 1998-2015. Innovation in high and low regimes, has effects that will increase unemployment. Technological development increases the unemployment rate in both country groups in both regimes of innovation level.