Winners and Losers of Technology Grants: Evidence on Jobs and Skills

131 Pages Posted: 27 Apr 2022 Last revised: 24 Jan 2025

See all articles by Johannes Hirvonen

Johannes Hirvonen

ETLA, Research Institute of the Finnish Economy

Aapo Stenhammar

Aalto University

Joonas Tuhkuri

Massachusetts Institute of Technology (MIT)

Date Written: May 6, 2022

Abstract

Industrial policies are widespread, but evidence on their workforce effects remains limited. We examine the impact of EU technology subsidies on employment and skill demand in Finnish SMEs, 1994–2018. The subsidies fund new machinery, including robots and CNC machines. Comparing closely matched grant winners and losers, we find that receiving a grant increased employment without changing skill composition. Leveraging novel application text data and machine learning, we match firms, analyze their plans, and show that subsidies primarily supported expansion, such as launching new products, rather than automating work. In contrast, analysis of a broader sample of manufacturing firms outside the program reveals that IT investments are more strongly associated with skill upgrading than machinery investments, suggesting that different technologies may impact jobs differently. Our findings indicate that machinery grants can create opportunities for non-college-educated workers.

Keywords: technology, labor demand, skills, industrial policy

JEL Classification: J23, J24, O33, O25, H25

Suggested Citation

Hirvonen, Johannes and Stenhammar, Aapo and Tuhkuri, Joonas, Winners and Losers of Technology Grants: Evidence on Jobs and Skills (May 6, 2022). Available at SSRN: https://ssrn.com/abstract=4081625 or http://dx.doi.org/10.2139/ssrn.4081625

Johannes Hirvonen

ETLA, Research Institute of the Finnish Economy ( email )

Lonnrotink. 4 B
FIN-00120 Helsinki, 00120
United States

Aapo Stenhammar

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

Joonas Tuhkuri (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

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