Employment and innovation: Firm level evidence from Argentina ∗ Ramiro de Elejalde † David Giuliodori ‡ Rodolfo Stucchi § September 2, 2013 Abstract This paper provides evidence about the effect of innovation on employment in Argentina in the period 1998-2001. In particular we quantify the impact of process and product innovations on employment growth and the skill composition. Our results show that: (i) Product innovations have a positive impact on employment growth biased towards skill labor. (ii) Process innovations do not affect employment growth or composition. (iii) There are no heterogeneous effects in technology intensity and size. (iv) Most of the contraction in employment in this period was explained by non-innovators. JEL classification: D2, J23, L1, O31, O33. Keywords: Process innovation, Product innovation, Employment growth, Argentina. 1 Introduction The effect of innovation on employment has been attracting economists and policy makers’ attention for a long time. This fact is not surprising. On the one hand, it has been argued that technical change could destroy jobs and, on the other hand, economic theory does not provide a clear answer about the employment effect of innovation. The relationship between innovation and employment is not straightforward. The literature has documented several compensation * We thank Gustavo Crespi, Jordi Jaumandreu, Alessandro Maffioli, Jacques Mairesse, Pierre Mohnen, Ezequiel Tacsir, and participants at GLOBELICS 2011 and MEIDE 2011 for their helpful comments. The usual disclaimer applies. This paper is part of the Inter-American Development Bank Project “Employment Generation, Firm Size and Innovation in Latin American: The Microeconomic Evidence.” The information and opinions presented in this paper are entirely those of the authors, and no endorsement by the Inter-American Development Bank, its Board of Executive Directors, or the countries they represent is expressed or implied. † ILADES-Universidad Alberto Hurtado, Santiago, Chile. Email: ramirode@gmail.com. ‡ Instituto de Economía y Finanzas, Universidad Nacional de Córdoba, Córdoba, Argentina. Email: dg- iuliodori@eco.unc.edu.ar. § Inter-American Development Bank, Santiago, Chile. Email: rstucchi@iadb.org. 1