The effect of product innovations on employment: empirical analysis of the European Union countries

J. A. Schumpeter defined a creative destruction term to show that technological progress gives an opportunity to economic agents to become winners but, at the same time, this process causes a rise of losers. Hence, innovation is the key driving force of economic competitiveness. An overview of research by H. Feldmann (2013) reveals that most of them prove that technological change can increase unemployment in certain circumstances and in some cases even in the long run and this confirms the 19th century Malthus’ statement that a rising demand for a product due to reduced prices is unlikely to be sufficient as demand for redundant workers is decreasing. Profit growth cannot be sufficient unless the companies firstly invest in capital-intensive technologies. Finally, lower wages may be a reason that companies will not be encouraged to hire more employees due to a reduced demand for products. As a result of all these factors, innovation leads to technological unemployment (Malthus, 2008; Vivarelli, 2014), which leads to the fact that some workers lose their jobs, as a direct consequence of labor-saving innovation. D. H. Autor (2015) states that there is no long-run increase in unemployment caused by technological progress but changes in technology affect the types of jobs available. According to the theoretical results, technological unemployment occurs as a direct effect of innovation irrespective of its nature. But, according to the classical “compensation theory,” harmful effects of technological change can be explained by the market mechanisms that are able to counterbalance the direct impact of process innovation and the job creating effects of product innovation (Vivarelli, 2011). In V. Upadhyay (2015) opinion, technological unemployment is impossible – it creates more jobs than destroys. [...]Ekonomikos katedraVytauto Didžiojo universiteta