Skill structure, employment and technological progress - Empirical evidence using data of the Mannheim Innovation Panel

For the Federal Republic of Germany and for Baden-Wurttemberg, with its high concentration of manufacturing and a large share of innovative firms, understanding the economic relationship between technological change, employment and skill structure is of utmost importance. In an effort to quantify the employment effects of technological progress, labour market demand growth in the West German and Baden-Wurttemberger manufacturing;sectors between 1992/94, 1993/95, and 1992/95 are estimated separately for small and large firms. The impact of process innovations on labour demand growth tends to be negative, while that of product innovations is part positive and part negative. The combined effect of process and pro duct innovations depends on the time period and the firm size under investigation. However, the impact was most often negative. Differences in skill structure between innovative and non-innovative firms are investigated using a rank correlation analysis. Technological progress has a tendency to release unskilled labour. Pressure to increase skill levels is more evident in innovative firms.