Internet Diffusion, Innovation and Employment Growth in the Costa Rican Manufacturing Sector

This study assesses the direct impact of Internet diffusion on total labor demand, the demand for skilled labor, and the demand for female labor. Using data from a sample of manufacturing firms in Costa Rica from 2006 to 2007, the study finds that both process and product innovations are positively related to employment growth and that the use of the Internet by workers for business purposes does not impact demand for labor. The positive impact of product innovation on labor demand increases when workers use the Internet for business purposes. This relationship was not found in cases of skilled and female labor demand. These findings underscore the Internet's importance in improving the impact of product innovation on employment growth and suggest that employee use of the Internet is neither a labor displacement innovation nor a gender or skill-biased innovation.