Supply chain digitalization and firm employment: evidence from China’s supply chain innovation and application pilot

This paper studies how policy-induced supply chain digitalization affects firm-level employment. We use China’s 2018 Supply Chain Innovation and Application pilot programme, under which central ministries designated a list of pilot firms required to digitalize their supply chain operations, as a quasi-natural experiment, and estimate difference-in-differences models on a panel of A-share listed firms over 2010–2024. Pilot designation raises firm employment by roughly 26 log points (about 29.6%) relative to non-pilot firms, an effect that emerges after 2018, persists over time, and survives an event-study analysis, randomization inference, alternative measures of supply chain digitalization, and robustness checks. Pilot firms also increase measured supply chain digitalization after designation. Consistent with the policy operating through firm expansion rather than labour substitution, policy-induced supply chain digitalization also increases patenting, total factor productivity, and operating revenue, and raises average wages for both ordinary employees and executives. The employment response is larger among firms that retain more earnings, face tighter financing constraints, and operate in more competitive industries, and it is amplified when firm-level and city-level pilots overlap. In contrast to the displacement fears surrounding automation, our results provide evidence that policy-induced digitalization of supply chain linkages expanded jobs and wages at targeted firms.