The Influence of Technological Innovation on Labor Productivity in Developing Asian Countries

Abstract

This study aims to investigate the dynamic relationship between technological innovation and labor productivity in 5 Developing Asian countries (Bangladesh, India, Iran, Pakistan, Sri Lanka) from 2002-2022. Utilizing a Pool Mean Grouped/Panel Autoregressive Distributed Lag Model, it examines the extent to which technological advancements impact labor productivity in economies characterized by varying levels of development and industrialization. The results reveal that technological innovation poses a significant impact in increasing labor productivity, both in the short term and the long term. This implies that as technological innovations increase, it will bring meaningful progress in labor productivity in Developing Asian nations. Furthermore, the findings indicate that certain factors can either facilitate or impede progress toward labor productivity. In both the short and long term, technological innovation fosters sustained increases in labor productivity by enabling efficiency gains and economic growth. Inflation may temporarily disrupt productivity by distorting price signals and reducing real wages. Labor force participation and human capital investment contribute positively to productivity over time through a skilled workforce, enhancing innovation absorption and application. The presence of an error correction term in the model suggests that the dynamics of the relationship between technological innovation and labor productivity are stable over time. This implies that any deviations from the long-term equilibrium in labor productivity are corrected over time. This study provides valuable insights and recommendations for policymakers and stakeholders striving to increase labor productivity. By understanding the complex interplay between technological innovation and labor productivity, informed strategies can be developed to mitigate the adverse impacts of technological innovation on labor productivity for sustainable development.

Keywords: Technological Innovation, Labor Productivity, ARDL, Asian Countries