China needs a substantial growth of modern-sector employment to absorb its huge supply of underemployed people and new labor market entrants. The present crisis with its massive layoffs of workers makes the issue even more pressing. Although the government has announced large public investments to deal with the business cycle downturn, less attention has been paid to the structural aspects of Chinese underemployment. One exception is the recent emphasis of technology development. However, science and technology (S&T) can have both positive and negative effects on employment. Using information from a large sample of manufacturing firms in China between 1996 and 2004, we analyze how S&T affects employment. Our results suggest that S&T does not promote employment growth.
Xiaojing Guan, He Ping, and Jinchang Qian from the National Bureau of Statistics of China have been most helpful in providing us with the data. We thank Changwen Zhao, Bhanupong Nidhiprabha, Wei Zhang, and participants at the Asian Economic Panel meeting in Tokyo 2009 for valuable comments and suggestions on how to improve upon an earlier draft of this paper. Fredrik Sjöholm gratefully acknowledges financial support from the Torsten and Ragnar Söderberg Foundation.