Centro de Investigaciones Económicas - CINVE

Does Innovation Destroy Employment in the Services Sector? Evidence from a Developing Country
    • 06/2015

    Diego Aboal, Paula Garda, Bibiana Lanzilotta y Marcelo Perera


    The employment effect of innovation in the heterogeneous universe of services is investigated using firm-level data provided by the 2004–9 Uruguayan services innovation surveys. The empirical analysis shows that the effect of product innovation on employment is positive, while process innovation appears to have no effect. Process innovation activities tend to replace low-skilled jobs with jobs of a higher level of qualification. Product innovation allows for efficiency gains in the production of new services with unskilled labor, and no gains with skilled labor. The results found for knowledge-intensive business services and small firms, with some exceptions, are similar to those found for the whole sample.