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Modern manufacturing capital, labor demand and product market dynamics: evidence from France

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  • Aghion, Philippe
  • Antonin, Celine
  • Bunel, Simon
  • Jaravel, Xavier Laurent

Abstract

We use comprehensive micro data in the French manufacturing sector between 1995 and 2017 to document the effects of a fall in the cost of investments in modern manufacturing capital, including modern automation technologies, on employment, wages, sales, prices, and business stealing. Causal effects are estimated with event studies and a shift-share IV design leveraging pre-determined supply linkages and productivity shocks across foreign suppliers of manufacturing capital. At all levels of analysis - plant, firm, and industry - the estimated impact of capital investments on employment is positive, even for unskilled industrial workers. Further-more, we find that capital investments lead to higher sales and exports, higher profits, and lower consumer prices, while wages and wage inequality remain unchanged. We estimate a positive industry-level employment response to manufacturing capital investments only in industries that are exposed to import competition, due to business-stealing across countries. Thus, typical investments in modern manufacturing capital lead to an increase in domestic labor demand and promote competitiveness in international markets.

Suggested Citation

  • Aghion, Philippe & Antonin, Celine & Bunel, Simon & Jaravel, Xavier Laurent, 2023. "Modern manufacturing capital, labor demand and product market dynamics: evidence from France," LSE Research Online Documents on Economics 121340, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121340
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    Cited by:

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    2. Kirill Borusyak & Peter Hull & Xavier Jaravel, 2023. "Design-Based Identification with Formula Instruments: A Review," NBER Working Papers 31393, National Bureau of Economic Research, Inc.
    3. Deng, Liuchun & Müller, Steffen & Plümpe, Verena & Stegmaier, Jens, 2023. "Robots, Occupations, and Worker Age: A Production-Unit Analysis of Employment," IZA Discussion Papers 16128, Institute of Labor Economics (IZA).
    4. Singer, Gregor, 2024. "Complementary inputs and industrial development: can lower electricity prices improve energy efficiency?," LSE Research Online Documents on Economics 122365, London School of Economics and Political Science, LSE Library.
    5. Kirill Borusyak & Peter Hull & Xavier Jaravel, 2024. "A Practical Guide to Shift-Share Instruments," NBER Working Papers 33236, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    modern manufacturing capital; investments; productivity; France;
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    JEL classification:

    • L00 - Industrial Organization - - General - - - General

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