The Impact of Technological Innovation on Labor Market: Evidence from Low- and Middle-Income Countries

Abstract

With all the technological advancements over the world, a great interest is on its effect on jobs. Technological change takes away or creates more jobs for human? This debate has been going on for a long time and still ongoing in different countries. The limited studies on the topic in low and middle incomes countries gives us the opportunity to study a subject that have not yet been sufficiently addressed, specially that technology is changing work in these countries day by day as it was demonstrated in the covid19 pandemic. To be more objective in presenting the research finding we used a literature review based on the meta-analysis method. We tried to synthesize and summarize the results of 19 studies by using a quantitative method that allowed us to report 531 estimations. Three reference models were distinguished: Derived labor demand model (DDM) developed by Van Reenen (1997), skill share model (SSM) created by Machin and van Reenen (1998) and the most recent: innovation decomposition model (IDM) used by Harisson et al. (2014). The review found that the effect of technology varies depending on the type of innovation, for process innovation work can be more efficient and less time-consuming for skilled workers although unskilled workers are more likely to be replaced by automated processes. For product innovation the effect is positive on total employment, we may consequently state the validity of Skill biased technological change hypotheses (SBTC) for low- and middle-income countries. However, the presence of publication bias and heterogeneity limits the generalizability of these results.