February 2025
Johannes Hirvonen, Aapo Stenhammar, Joonas Tuhkuri
Abstract:
Industrial policies are widespread, but evidence on their workforce effects remains limited. We present novel evidence on 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 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.
Download this paper here: https://www.rfberlin.com/wp-content/uploads/2025/02/25004.pdf
