Innovation And Labor Demand in Ghana’s manufacturing and Service Firms

Abstract

Innovation is widely considered as an important source of firm-level productivity and growth. However, the effect of innovation at the firm level in terms of employment is not clear, literature suggest innovation can create or destroy jobs for which reason the net effect on employment is ambiguous. This study seeks to provide evidence on the determinants of innovation in Ghana and its effects on employment at the firm level on a number of small, medium and large firms. Specifically, the study examines the effects of innovation on the quantity and quality of employment in both manufacturing and service firms. Using the World Bank Enterprise Survey conducted in 2013, the study adopts a bivariate probit regression model to examine the determinants of innovation in Ghana. Subsequently, the study adopts the ordinary least squares estimates to investigate the effects of innovation on the quantity and quality of labour employed. The results indicate that product innovation is positively associated with employment in Ghana. In terms of innovation and employment quality the study reveals that the skill biased technological change that favours skilled labour over unskilled labour is not confirmed in the Ghanaian context.