Threshold effects of technology import on industrial employment: a panel smooth transition regression approach

Abstract

AbstractThe relationship between imported technology and employment is a controversial issue. This study aims to test the hypothesis that the relationship between imported technology and employment is non-linear and evolves with the level of technology imports. The study covers two groups of developed and developing countries over the period 2000–2019. The Panel Smooth Transition Regression (PSTR) model is used to estimate the technology import threshold and its impact on industrial employment. The study finds a positive relationship between imported technology and industrial employment for technology import rates above the 13.667% threshold, above which imported technology begins to improve industrial employment in developed countries. In contrast, for developing countries, the results showed a negative relationship between imported technology and industrial employment for technology import rates above the 3.44% threshold above which imported technology begins to reduce industrial employment. These results suggest that the threshold level of technology imports can be considered as an indicator for promoting innovation policies in both developed and developing countries to minimize the negative effect of process innovation resulting from imported technology.