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How does digital technology adoption affect corporate employment? Evidence from China

Author

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  • Zhou, Yuwen
  • Shi, Xin

Abstract

The rapid adoption of digital technologies has sparked debates about their employment effects, yet evidence from developing economies remains limited. Previous studies highlight labor market polarization, where automation disproportionately displaces low-skilled workers while benefiting high-skilled ones. Using text analysis of corporate disclosures, we measure digital adoption across Chinese firms (2010–2019) and estimate its employment impacts. A one standard deviation increase in digital adoption raises corporate employment by 5.47%, driven by shifts toward non-routine cognitive roles and higher-educated employees. Digital adoption also increases average wages but leaves labor share unchanged. Three mechanisms explain these effects: total factor productivity (TFP) gains, market share expansion, and capital deepening, with TFP contributing most strongly. These results reveal how digital technologies reshape employment structures, emphasizing the need for firms to balance technological investments with organizational adaptation to mitigate skill mismatches.

Suggested Citation

  • Zhou, Yuwen & Shi, Xin, 2025. "How does digital technology adoption affect corporate employment? Evidence from China," Economic Modelling, Elsevier, vol. 147(C).
    • Handle: RePEc:eee:ecmode:v:147:y:2025:i:c:s0264999325000409
    DOI: 10.1016/j.econmod.2025.107045
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    More about this item

    Keywords

    Digital technology; Automation; Employment;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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