Servitization and employment effects in manufacturing: international experiences under digital technology conditions

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This study examines the impact of manufacturing servitization on employment in 43 countries between 2000 and 2020, considering the role of digital technology. Using data from the World Input-Output Tables and the International Labour Organization, we explore how servitization affects employment in manufacturing and productive services. Our findings show that servitization leads to a substitution effect on manufacturing employment and a creation effect on productive service employment. The adoption of digital technology amplifies the substitution effect while weakening the creation effect. We further conduct heterogeneity analysis based on factor demand, factor input, level of industrialization, and level of economic development. We find that the substitution effect is most significant in low-tech manufacturing, while the creation effect is strongest in high-tech manufacturing. Regarding factor input, the creation effect is concentrated in low- to mid-tech productive service sectors. The substitution effect is more pronounced in less industrialized and developed countries, while the creation effect is more evident in highly industrialized and developing countries.The study identifies two key mechanisms through which servitization influences employment, namely improving information technology levels and reducing institutional distance. These findings contribute to the understanding of employment transitions in the digital economy and provide valuable insights for policymaking.