The Effect of Technological Innovation on the Quantity and Quality of Employment in Ghana

r4d Working Paper 2016/9 by Agyapomaa Gyeke-Dako, Abena D. Oduro, F. Ebo Turkson, Priscilla Twumasi Baffour, Emmanuel Abbey

ABSTRACT: Innovation is widely considered to be a primary source of economic growth and policies to encourage firm level innovation are topical on the agenda in most countries. Similarly, firm-level relationship between innovation and employment is an important topic of research because the effects of innovation on employment at the firm level have important ramifications on how different agents resist or encourage innovation. Although the impact of innovation on employment is of particular interest, the relationship between innovation and employment is not clear cut.  Individual innovations may destroy jobs but innovation can also stimulate demand. The paper consequently investigates the effect of innovation (process and product innovations) introduced at the firm level on employment, specifically, the quantity and quality of employment. To this effect, the study adopts both linear and non-linear models to examine the relationship between technological innovation and employment in both manufacturing and service firms in Ghana by using firm-level survey on a number of small, medium and large firms. Our results indicate that product innovation is positively associated with employment in Ghana. In terms of innovation and employment quality we find that skill biased technological change that predicts capital skill complementarity does not wholly translate in the Ghanaian context.