Industrial and employment dynamics

Oesterreichische Nationalbank (Jubiläumsfonds)

Technical change and the increasing mechanisation of production activities are at the root of the declining share of industry, and particularly of manufacturing in terms of employment and production observed in most industrialised counties in the postwar period. This is often referred to as process of deindustrialisation associated with a higher level of economic development. The literature on industrial dynamics asserts that technical change is one of the primary determinants of industrial dynamics, shaping processes of entry and exit and thereby influencing the size distribution of establishments. On the other hand, the contraction of manufacturing brings along a displacement of workers from factory jobs to services or unemployment, representing the cost side of deindustrialisation.

This research proposal focuses on an empirical analysis of industry and employment

dynamics at an intermediate level of disaggregation of Austrian manufacturing. The research question of this proposal is: Do different industries react differently to technology (supply) and demand shocks? And if they do, does it matter and how can this be understood? We evaluate this question by investigating the impact of

technical change and changes in demand on structural industry characteristics, and on employment and wage dynamics in Austrian industry. The study of industrial dynamics is fundamental to many research avenues in economics.

While it is true that this research aims primarily to test underlying theories, our findings will have implications for a variety of policy questions related to competition policy, determinants of firm size distribution, employment and investment policy.