Vivarelli, M. and Pianta, M. (2000),
Employment Impact of Innovation: Evidence and
Policy, 240 pp. Routledge, London.
Technological progress is an important theme in
the economic literature, and one which addresses
patterns of economic growth. This book sheds
light on the link between innovation and employ-
ment performance in our economies by providing
in depth empirical study in this field. It represents
a useful analytical tool for both scholars and
policy-makers alike who are seeking a different
approach to analysing unemployment issues as
well as fighting them more effectively.
The specific contribution of this book is to
overcome the limits of current economic debates
about unemployment features by introducing an
explanation based on the importance of structural
factors. This suggestion is not marginal. Current
economic debate focuses on two prominent
theories which explain unemployment by fol-
lowing different analytical approaches.
The first, is one in which neo-classical scholars
identify rigidities within the labour market as the
reason why many labour markets, particularly the
European ones, experience high unemployment
rates. Unemployment is the outcome of institu-
tional restrictions that, by limiting the operation
of the labour market, harm the natural balancing
power of the market itself.
The second approach is represented by
Keynesian thinking, which interprets unemploy-
ment as the result of unsatisfactory demand con-
ditions. Unemployment in this approach is seen as
proof of the failure of unregulated markets: supply
does not create its own demand; it is unemploy-
ment that supports the need for state intervention
in the labour market through increased demand
and employment-friendly policies.
These two theories are substantially different in
analytical terms and policy implications, but also
share some important features.
• Keynesian and neo-classical interpretations of
unemployment both fall “within” the labour
market analysis, the contribution they adopt
from other disciplines being marginal to unem-
• The two schools of thought deal with the
concept of equilibrium which has been over
shadowed by the development of dynamic and
• They are “partial” interpretations of the labour
market, for they make assumptions that shift
research focus mainly to demand or supply con-
ditions. In particular the assumptions related to
innovation, lead to policy implications suffering
from this theoretical limitation.
The need for a broader and more effective way to
understand unemployment rises from this analysis.
It seems useful to fit the Classical and the
Keynesian unemployment explanations into a
wider approach characterised by the emergence of
multidisciplinary aspects, by the dynamic inter-
pretation of the unemployment problem, by the
recognition of the role of structural factors, and by
the appreciation of the increasing importance of
technological progress and innovation in our
Vivarelli and Pianta’s book succeeds within this
theoretical framework. They propose a different
ranking of factors affecting unemployment; this
analysis is followed by a discussion of differences
in the evaluation of policy tools discussed in main-
stream economics (for a comparison, see Layard
et al., 1991).
The first chapter of the book goes directly to
the core issue with a general description of the
set of structural factors affecting unemployment.
In particular the authors consider the roles played
by technological change, globalisation, demand,
sectoral structure, the firms’ organisation, labour
costs and labour market rigidities, and the new
forms and quality of employment. The main goal
Small Business Economics
22: 417–420, 2004.