The macroeconomic impacts of technological innovation on employment, inflation and total factor productivity in emerging market and developing economies : A thesis submitted in partial fulfilment of the requirements for the Degree of Doctor of Philosophy at Lincoln University

Abstract

Technological innovation has been identified as a key driver fuelling global economic growth. The potential impacts of technological innovation on the economic system and macroeconomic stability have been debated. These impacts have been critically and consistently discussed in the literature but remain underexplored in the context of emerging market and developing economies (EMDEs). In the era of globalization, EMDEs have become more prominent in reshaping the world economy because of their increasingly rapid economic growth. The dramatic rise in technological innovation in EMDEs may exert some significant macroeconomic impacts on employment, inflation and productivity, which would ultimately affect economic dynamics and hence the global economy. Understanding these macroeconomic impacts in EMDEs is, therefore, essential to cultivate the benefits of technological innovation and develop effective policy responses. This research investigates the macroeconomic impacts of technological innovation on employment, inflation and total factor productivity (TFP) in EMDEs. The research empirically examines the employment effects in three different perspectives (total employment, total hours worked and sectoral employment), analyses the inflation effects by two measures of inflation (gross domestic product deflator and consumer price index), and explores the long-run relationships of TFP with both domestic and foreign technologies. The research uses panel data comprising 65 EMDEs for the period 1996-2017. The panel data analyses use various panel econometric methods that account for the cross-sectional dependence issue. First, technological innovation has significant positive relationships with total employment, hours worked and sectoral employment; these positive relationships are also significant at a one-year lag. These results suggest that technological innovation is a beneficial policy tool to improve labour demand at all levels. Secondly, there is a significant inverse relationship between technological innovation and both measures of inflation. This finding casts light on the debate behind the falling inflation associated with increased technological innovation; this is an important policy contribution. Lastly, the research finds that domestic technologies play the most vital role in stimulating TFP whereas the effects of foreign technologies on TFP are significantly different depending on the channels of spillovers. Foreign technology spillovers through the import channel are beneficial for TFP, but the export channel negatively affects TFP. The impact of foreign technology spillovers through inward foreign direct investment on TFP is not significant, albeit with a positive sign. Therefore, policies should be made with caution when dealing with foreign technology spillovers.