Abstract
Technological change has affected skill upgrading extensively in many developed economies since 1970s. The evidence on the same relationship in catching-up economies is rather sparse, but confirms usually the relevance of technological change on skill demand. This chapter investigates the effect of innovation on skill augmenting in midtransition and tests whether this effect has been magnified by trade activities or by FDI. The paper uses microdata of third Estonian community innovation survey (CIS 3) merged with business register data. It is found that innovation has economically small and statistically insignificant effect on demand for tertiary-educated workers. Exporting to technologically advanced countries diffuses technology and increases demand for tertiary-educated workers, while foreign ownership weakens the effect of innovation on skills. These results indicate that there are presumably other more important factors determining skill demand in postcommunist CEE countries. Technological changes have presumably altered job tasks, but the effect on demand for tertiary-educated workers seems to have been weaker in the countries under transition than in developed high-income countries.
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Notes
- 1.
- 2.
This instrument may itself be endogenous to the innovation variable. Nevertheless, the innovation cooperation variable also includes innovation cooperation that does not end up in the application of innovation. Some firms have a network of innovation partners without putting innovations into practice. The Hausman test gives the same result when we exclude this instrument.
- 3.
Our variable of an export destination market to the North also contains markets in the EU new candidate countries. Consequently, part of the South–South type of trade is also captured in the North–South trade variable.
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Acknowledgments
I would like to thank Karsten Staehr and Tiiu Paas for their insightful comments and discussions. Also Jaan Masso for providing commercial register data of Estonian enterprises and Aavo Heinlo for providing Community Innovation Survey data. The author alone is responsible for any remaining errors and inconsistencies. The author is grateful to the Estonian Ministry of Education (grant No SF0180037s08) and ETF8311 for the financial support.
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Meriküll, J. (2012). The Effect of Innovation on Skill Upgrading in Midtransition: Microeconometric Evidence from Estonia. In: Carayannis, E., Varblane, U., Roolaht, T. (eds) Innovation Systems in Small Catching-Up Economies. Innovation, Technology, and Knowledge Management, vol 15. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-1548-0_15
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