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Innovation Creates Jobs but Can Increase Inequality
“Innovation creates more and better jobs than it replaces. However, the benefits aren’t equally shared,” says Farid Toubal, Professor of Economics at the University of Paris Dauphine and co-author of the study Knowledge, Jobs, and Unemployment in Regions. “The strongest gains are in manufacturing and among STEM and highly skilled workers—worsening inequality. From an EU cohesion perspective, it is crucial not only to promote innovation but also to support it through education and redistributive policies.”
The study examines the link between innovation and employment in 272 European regions from 2011 to 2021 using patenting data. It goes beyond simple patent counts by incorporating citation patterns and measures of technological concentration, providing a detailed picture of regional innovation dynamics. Results show that the fastest growing sub-fields are innovation in nanotechnology, electrical machinery, surface technology and digital communication. Yet, the findings also show that while higher innovation quality (measured by forward citations per patent) significantly boosts employment, the strongest job creation happens when innovation is spread across multiple technological fields. Regions where R&D is too concentrated in just a few fields see weaker employment growth, despite overall innovation activity.
Find the interactive map on the RETHINK-GSC website.
The study thus relates to the wider debate around whether or not innovation leads to potential job displacement. This is often debated in public due to concerns about the employment impacts of automation and artificial intelligence (AI). The research shows that innovation increases business productivity and drives labor demand, ultimately supporting employment growth.
“Innovation is crucially important for growth in Europe. But not everyone will gain from it — and education is important. That’s were policy makers need to step in to make sure that people and regions are not left high and dry. Strengthening Europe's competitiveness requires supporting diverse R&D across the continent, addressing structural disparities in peripheral and smaller countries, and deepening integration into global knowledge networks,” says Holger Görg, project leader of RETHINK-GSC and head of the research group ‘International Trade and Investment’ at the Kiel Institute. “Aligning these efforts with education and redistribution policies can help ensure that the benefits of technological progress are shared more equitably — ultimately promoting both European competitiveness and cohesion.”
About RETHINK-GSC
The project ‘Rethinking Global Supply Chains: Measurement, Impact and Policy’ (RETHINK-GSC) captures the impact of knowledge flows and service inputs in Global Supply Chains (GSCs). Researchers from 11 institutes are applying their broad expertise in a multidisciplinary approach, developing new methodologies, and using innovative techniques to analyse, measure, and quantify the increasing importance of intangibles in global supply chains and to provide new insights into current and expected changes in global production processes.
