The role of innovation and agglomeration for employment growth in the environmental sector

Abstract

The environmental sector is supposed to yield a dual benefit: its goods and services are intended to tackle environmental challenges and its establishments should create new jobs. However, it is still unclear in empirical terms whether that really is the case. This paper investigates to what extent employment growth in establishments with green products and services is higher compared to other establishments. Furthermore, the main factors determining labour demand in this field are analysed. We use linked employment and regional data for Germany. The descriptive results show that the environmental sector is characterised by disproportionately high employment growth. The application of a generalised linear mixed model reveals that especially innovation and industry agglomeration foster employment growth in establishments in the environmental sector. Establishments without green products and services show a smaller increase in employment, even if they are also innovative.

Keywords:

• Employment
• environmental sector
• eco-innovation
• green jobs
• industrial agglomeration

JEL classification:

• J21
• O33
• Q55
• R23

Acknowledgements

The authors are grateful to two anonymous referees for their valuable comments and suggestions. Furthermore, we would like to thank the participants of conferences and workshops in Grenoble, Helsinki, Innsbruck, Montreal and Nice for fruitful discussions. We would also like to thank the data management team of the IAB department ‘IT Services and Information Management’ for their kind help; special thanks go to Ali Athmani, Steffen Kaimer, Jonas Krüger and Cerstin Rauscher.

Notes

¹ Environmental establishments: Short for ‘establishments within the environmental goods and services sector’.

² In terms of data collection and the organisation of data, the SEEA refers to Eurostat’s data collection handbook, which provides a more precise definition: ‘The environmental goods and services sector consists of a heterogeneous set of producers of technologies, goods and services that: Measure, control, restore, prevent, treat, minimize, research and sensitise environmental damages to air, water and soil as well as problems related to waste, noise, biodiversity and landscapes. This includes “cleaner” technologies, goods and services that prevent or minimise pollution. Measure, control, restore, prevent, minimise, research and sensitise resource depletion. This results mainly in resource-efficient technologies, goods and services that minimise the use of natural resources. These technologies and products (i.e. goods and services) must satisfy the end purpose criterion, i.e. they must have an environmental protection or resource management purpose […] as their prime objective.’ (Eurostat 2009, 29).

³ Based on the SEEA definition of environmental goods and services, the International Labour Organization (ILO) emphasises in their definition of employment in environmental activities the difference between employment in the production of environmental outputs and employment in environmental processes (ILO 2013a, 2013b, 2013c). Furthermore, the ILO introduces a tighter definition of green jobs by adding a decent work dimension to the environmental dimension (ILO 2012, 2013a, 2013b, 2013c). In the sense of the ILO definition, green jobs include only employment in environmental activities that fulfil the conditions of decent work (decent work indicators according to ILO 2012). Our analysis only captures the environmental dimension of the ILO definition.

⁴ The notions of employment growth and employment dynamics are used differently in the literature. According to many authors (e.g. Carlsson, Eriksson, and Gottfries 2013; Dauth 2013; Hyatt and Spletzer 2013; Konigsberg, Spletzer, and Talan 2009), employment dynamics are seen as the growth or decline of employment between two dates, which corresponds to the concept of employment growth. Other authors (e.g. Bauer, Bender, and Bonin 2007; Hamermesh, Hassink, and Ours 1996; Kölling 2012) define employment dynamics in the sense of labour turnover or worker flows. In the paper in hand, we focus on employment growth.

⁵ Access to the Establishment Panel and the BHP is provided by the Research Data Centre (FDZ) of the German Federal Employment Agency at the IAB. The regional employment statistics are based on a customised report provided by the statistics office of the Federal Employment Agency.

⁶ This study uses the IAB Establishment Panel waves of 2012, 2010, 2009, 2005, 1999 and the Establishment History Panel (BHP) version 7510 (here: years 1993–2010). Data access was provided by the Research Data Centre (FDZ) of the German Federal Employment Agency (BA) at the Institute for Employment Research (IAB). For detailed data documentation, see Ellguth, Kohaut, and Möller (2014), Fischer et al. (2009) and Gruhl, Schmucker, and Seth (2012).

⁷ This result only holds for innovative environmental establishments. Models including dummies for all establishments for the different environmental subfields did not yield significant results. Only innovative firms in the respective environmental technology fields show a better employment development.