TY  - RPRT
        AU  - Taghizadeh, Rahim
AU  - Behestani, Salar Babazadeh
AU  - Arabsheibani, Reza
        TI  - The Impact of Technological Change on Employment: A Composite Indicator Approach
        PY  - 2026/Jul/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 18814
        UR  - https://www.iza.org/index.php/publications/dp18814
        AB  - generally a consensus remains elusive regarding the optimal method for measuring the effects of technological change and innovation on employment. This study introduces a Technological Change Composite Indicator (TCI), constructed using Principal Component Analysis (PCA) to synthesize seven firm-level innovation metrics. This methodology mitigates issues associated with multicollinearity in regression analyses involving correlated variables. The proposed TCI serves as a proxy for technological change to examine its association with employment in manufacturing sectors across 10 European Union countries and 17 seventeen manufacturing sectors with country fixed effects and a one‑year time lag. We find that a one‑unit increase in the TCI corresponds to a 0.58% higher employment level. The association is positive and statistically significant, indicating that a multidimensional measure of technological change outperforms traditional single proxies such as R&D expenditure or patent counts. By moving beyond narrow indicators, our approach offers a more reliable empirical basis for understanding the employment implications of technological change, including emerging technologies such as AI.
        KW  - composite indicator
KW  - latent approach
KW  - technological change
KW  - employment
KW  - manufacturing industry
KW  - PCA analysis
KW  - regression method
        ER  -