Population Ageing, Labour Market Rigidity and Corporate Innovation: Evidence from China

Youchao Tan, Xiumei Liu, Hanwen Sun, Colin Zeng

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Population ageing leads to labour scarcity and labour market rigidity. Contrary to supply-side economists’ belief that labour market rigidity tends to suppress firm innovation, we provide novel evidence of a positive relationship between population ageing and firm innovation in China. This enhancement effect is greater for firms with higher labour costs, consistent with the argument that labour scarcity encourages labour-saving innovation in response to demographic shifts. In addition, the observed positive effect is particularly pronounced for state-owned enterprises, which are widely acknowledged to be overstaffed with older workers, and firms in industries that pursue Schumpeter-II innovation and engage in more intense research and development. In addition, population ageing helps firms to generate more exploitative (vs. exploratory) innovation. Overall, our findings suggest that firms facing population ageing can adapt their strategies to innovate successfully.
Original languageEnglish
Article number104428
JournalResearch Policy
Issue number2
Early online date17 Nov 2021
Publication statusPublished - 30 Mar 2022


  • Innovation
  • Labour market rigidity
  • Labour scarcity
  • Population ageing

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation


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