IDEAS home Printed from https://ideas.repec.org/a/bla/buecrs/v76y2024i3p726-748.html
   My bibliography  Save this article

Does digital transformation crowd out the employment of lower skill labor?

Author

Listed:
  • Ying Wu
  • Yuanyue Deng

Abstract

This paper investigates the effect of digital transformation on the employment of low‐skilled labor. Using a large sample of Chinese listed firms for the 2008–2021 period, we find that digital transformation reduces the employment of low‐skilled labor. This result is robust to a battery of sensitivity tests and is attenuated for firms located in regions with higher unemployment rates and for small enterprises. Mechanism tests show that digital transformation affects the employment of low‐skilled labor through the wage effect channel and the substitution effect channel. The paper deepens our understanding of the economic effect of digital transformation on the labor market.

Suggested Citation

  • Ying Wu & Yuanyue Deng, 2024. "Does digital transformation crowd out the employment of lower skill labor?," Bulletin of Economic Research, Wiley Blackwell, vol. 76(3), pages 726-748, July.
    • Handle: RePEc:bla:buecrs:v:76:y:2024:i:3:p:726-748
    DOI: 10.1111/boer.12446
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/boer.12446
    Download Restriction: no
    File URL: https://libkey.io/10.1111/boer.12446?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Philippe Bacchetta & Kenza Benhima & Céline Poilly, 2019. "Corporate Cash and Employment," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(3), pages 30-66, July.
    2. Cai, Fang & Wang, Meiyan, 2010. "Growth and structural changes in employment in transition China," Journal of Comparative Economics, Elsevier, vol. 38(1), pages 71-81, March.
    3. Giroud, Xavier & Mueller, Holger M., 2021. "Firm leverage and employment dynamics," Journal of Financial Economics, Elsevier, vol. 142(3), pages 1381-1394.
    4. Zhou, Shuya & Zhou, Peiyan & Ji, Hannah, 2022. "Can digital transformation alleviate corporate tax stickiness: The mediation effect of tax avoidance," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    5. Riadh Manita & Najoua Elommal & Patricia Baudier & Lubica Hikkerova, 2020. "The digital transformation of external audit and its impact on corporate governance," Post-Print hal-04314467, HAL.
    6. David H. Autor & David Dorn, 2013. "The Growth of Low-Skill Service Jobs and the Polarization of the US Labor Market," American Economic Review, American Economic Association, vol. 103(5), pages 1553-1597, August.
    7. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July.
    8. Pengyu Chen & Yuanyuan Hao, 2022. "Digital transformation and corporate environmental performance: The moderating role of board characteristics," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1757-1767, September.
    9. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    10. Martin Falk & Federico Biagi, 2017. "Relative demand for highly skilled workers and use of different ICT technologies," Applied Economics, Taylor & Francis Journals, vol. 49(9), pages 903-914, February.
    11. Rong, Shu & Liu, Kai & Huang, Si & Zhang, Qi, 2020. "FDI, labor market flexibility and employment in China," China Economic Review, Elsevier, vol. 61(C).
    12. Guo, Feng & Zou, Bo & Zhang, Xiaofei & Bo, Qingwen & Li, Kai, 2020. "Financial slack and firm performance of SMMEs in China: Moderating effects of government subsidies and market-supporting institutions," International Journal of Production Economics, Elsevier, vol. 223(C).
    13. Verhoef, Peter C. & Broekhuizen, Thijs & Bart, Yakov & Bhattacharya, Abhi & Qi Dong, John & Fabian, Nicolai & Haenlein, Michael, 2021. "Digital transformation: A multidisciplinary reflection and research agenda," Journal of Business Research, Elsevier, vol. 122(C), pages 889-901.
    14. Xu, Mingli & Kong, Gaowen & Kong, Dongmin, 2017. "Does wage justice hamper creativity? Pay gap and firm innovation in China," China Economic Review, Elsevier, vol. 44(C), pages 186-202.
    15. Tao Zhang & Zhan-Zhong Shi & Yi-Rong Shi & Neng-Jun Chen, 2022. "Enterprise digital transformation and production efficiency: mechanism analysis and empirical research," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 2781-2792, December.
    16. Zhang, Chuan & Liu, Lixia, 2023. "Corporate inventory and cash holdings in digital economy strategy: Evidence from China," Finance Research Letters, Elsevier, vol. 53(C).
    17. Pär Hansson, 2000. "Relative Demand for Skills in Swedish Manufacturing: Technology or Trade?," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 533-555, August.
    18. Dominique Goux & Eric Maurin, 2000. "The Decline In Demand For Unskilled Labor: An Empirical Analysis Method And Its Application To France," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 596-607, November.
    19. Changling Sun & Ziang Lin & Marek Vochozka & Zuzana Vincúrová, 2022. "Digital transformation and corporate cash holdings in China’s A-share listed companies," Oeconomia Copernicana, Institute of Economic Research, vol. 13(4), pages 1081-1116, December.
    20. Zhaoyang Gu & Song Tang & Donghui Wu, 2020. "The Political Economy of Labor Employment Decisions: Evidence from China," Management Science, INFORMS, vol. 66(10), pages 4703-4725, October.
    21. Maha Khemakhem Jardak & Salah Ben Hamad, 2022. "The effect of digital transformation on firm performance: evidence from Swedish listed companies," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 23(4), pages 329-348, May.
    22. Manita, Riadh & Elommal, Najoua & Baudier, Patricia & Hikkerova, Lubica, 2020. "The digital transformation of external audit and its impact on corporate governance," Technological Forecasting and Social Change, Elsevier, vol. 150(C).
    23. Tian, Guangning & Li, Bo & Cheng, Yue, 2022. "Does digital transformation matter for corporate risk-taking?," Finance Research Letters, Elsevier, vol. 49(C).
    24. Fuxiu Jiang & Kenneth A Kim, 2020. "Corporate Governance in China: A Survey [The role of boards of directors in corporate governance: a conceptual framework and survey]," Review of Finance, European Finance Association, vol. 24(4), pages 733-772.
    25. Clemens, Jeffrey & Wither, Michael, 2019. "The minimum wage and the Great Recession: Evidence of effects on the employment and income trajectories of low-skilled workers," Journal of Public Economics, Elsevier, vol. 170(C), pages 53-67.
    26. Sasan Bakhtiari & Robert Breunig & Lisa Magnani & Jacquelyn Zhang, 2020. "Financial Constraints and Small and Medium Enterprises: A Review," The Economic Record, The Economic Society of Australia, vol. 96(315), pages 506-523, December.
    27. Johansson, Anders C. & Luo, Danglun & Rickne, Johanna & Zheng, Wei, 2017. "Government intervention in the capital allocation process: Excess employment as an IPO selection rule in China," China Economic Review, Elsevier, vol. 44(C), pages 271-281.
    28. Ferreira, João J.M. & Fernandes, Cristina I. & Ferreira, Fernando A.F., 2019. "To be or not to be digital, that is the question: Firm innovation and performance," Journal of Business Research, Elsevier, vol. 101(C), pages 583-590.
    29. Niu, Yuhao & Wen, Wen & Wang, Sai & Li, Sifei, 2023. "Breaking barriers to innovation: The power of digital transformation," Finance Research Letters, Elsevier, vol. 51(C).
    30. Hu, Yan & Che, Dexin & Wu, Fei & Chang, Xi, 2023. "Corporate maturity mismatch and enterprise digital transformation: Evidence from China," Finance Research Letters, Elsevier, vol. 53(C).
    31. Alan Manning, 2004. "We Can Work It Out: the Impact of Technological Change on the Demand for Low Skill Workers," CEP Discussion Papers dp0640, Centre for Economic Performance, LSE.
    32. Guy Michaels & Ashwini Natraj & John Van Reenen, 2014. "Has ICT Polarized Skill Demand? Evidence from Eleven Countries over Twenty-Five Years," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 60-77, March.
    33. Luo, Jin-hui & Xiang, Yuangao & Zhu, Ruichao, 2020. "When Are Pay Gaps Good or Bad for Firm Performance? Evidence from China," Management and Organization Review, Cambridge University Press, vol. 16(5), pages 1030-1056, December.
    34. repec:bla:reviec:v:8:y:2000:i:3:p:533-55 is not listed on IDEAS
    35. Alan Manning, 2004. "We Can Work It Out: The Impact of Technological Change on the Demand for Low‐Skill Workers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(5), pages 581-608, November.
    36. Balsmeier, Benjamin & Woerter, Martin, 2019. "Is this time different? How digitalization influences job creation and destruction," Research Policy, Elsevier, vol. 48(8), pages 1-1.
    37. Aubert-Tarby, Clémence & Escobar, Octavio R. & Rayna, Thierry, 2018. "The impact of technological change on employment: The case of press digitisation," Technological Forecasting and Social Change, Elsevier, vol. 128(C), pages 36-45.
    38. Li, Feng, 2020. "The digital transformation of business models in the creative industries: A holistic framework and emerging trends," Technovation, Elsevier, vol. 92.
    39. Wang, Jun & Hu, Yong & Zhang, Zhiming, 2021. "Skill-biased technological change and labor market polarization in China," Economic Modelling, Elsevier, vol. 100(C).
    40. Li, Xiaorong & Wang, Steven Shuye & Wang, Xue, 2017. "Trust and stock price crash risk: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 76(C), pages 74-91.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Sai & Wen, Wen & Niu, Yuhao & Li, Xin, 2024. "Digital transformation and corporate labor investment efficiency," Emerging Markets Review, Elsevier, vol. 59(C).
    2. Filippo Pusterla & Ursula Renold, 2022. "Does ICT affect the demand for vocationally educated workers?," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-22, December.
    3. Changling Sun & Ziang Lin & Marek Vochozka & Zuzana Vincúrová, 2022. "Digital transformation and corporate cash holdings in China’s A-share listed companies," Oeconomia Copernicana, Institute of Economic Research, vol. 13(4), pages 1081-1116, December.
    4. Cirillo, Valeria & Evangelista, Rinaldo & Guarascio, Dario & Sostero, Matteo, 2021. "Digitalization, routineness and employment: An exploration on Italian task-based data," Research Policy, Elsevier, vol. 50(7).
    5. Yang, Hefan & Liu, Xilu & Meng, Yao & Feng, Baoyi & Chen, Zhijun, 2024. "Digital transformation and the allocation of decision-making rights within business groups – Empirical evidence from China," Journal of Business Research, Elsevier, vol. 179(C).
    6. Bárány, Zsófia L. & Siegel, Christian, 2020. "Biased technological change and employment reallocation," Labour Economics, Elsevier, vol. 67(C).
    7. Zhou, Zhongsheng & Li, Zhuo, 2023. "Corporate digital transformation and trade credit financing," Journal of Business Research, Elsevier, vol. 160(C).
    8. Zsófia L. Bárány & Christian Siegel, 2018. "Job Polarization and Structural Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(1), pages 57-89, January.
    9. Li, Chengming & Huo, Peng & Wang, Zeyu & Zhang, Weiguang & Liang, Feiyan & Mardani, Abbas, 2023. "Digitalization generates equality? Enterprises’ digital transformation, financing constraints, and labor share in China," Journal of Business Research, Elsevier, vol. 163(C).
    10. Jiang, Kangqi & Du, Xinyi & Chen, Zhongfei, 2022. "Firms' digitalization and stock price crash risk," International Review of Financial Analysis, Elsevier, vol. 82(C).
    11. Qiao, Penghua & Liu, Siting & Fung, Hung-Gay & Wang, Chen, 2024. "Corporate green innovation in a digital economy," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 870-883.
    12. Fierro, Luca Eduardo & Caiani, Alessandro & Russo, Alberto, 2022. "Automation, Job Polarisation, and Structural Change," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 499-535.
    13. Chen, Zhongfei & Jiang, Kangqi, 2024. "Digitalization and corporate investment efficiency: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    14. Janssen, Simon & Mohrenweiser, Jens, 2015. "The long-lasting effect of technological change on the careers of young workers: Evidence from changes of mandatory training regulations," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112851, Verein für Socialpolitik / German Economic Association.
    15. Hua, Zesu & Yu, Yihua, 2023. "Digital transformation and the impact of local tournament incentives: Evidence from publicly listed companies in China," Finance Research Letters, Elsevier, vol. 57(C).
    16. Daniel Aaronson & Brian J Phelan, 2019. "Wage Shocks and the Technological Substitution of Low‐wage Jobs," The Economic Journal, Royal Economic Society, vol. 129(617), pages 1-34.
    17. Yang Yang & Jinmian Han, 2023. "Digital transformation, financing constraints, and corporate environmental, social, and governance performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3189-3202, November.
    18. Sebastian Lago Raquel & Federico Biagi, 2018. "The Routine Biased Technical Change hypothesis: a critical review," JRC Research Reports JRC113174, Joint Research Centre.
    19. Maarten Goos & Alan Manning & Anna Salomons, 2014. "Explaining Job Polarization: Routine-Biased Technological Change and Offshoring," American Economic Review, American Economic Association, vol. 104(8), pages 2509-2526, August.
    20. Rafa Madariaga & Joan Carles Martori & Ramon Oller, 2019. "Wage income inequality in Catalonian second-rank cities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(2), pages 285-304, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:buecrs:v:76:y:2024:i:3:p:726-748. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0307-3378 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.