The impact of ICT and e-commerce on employment in Colombia

Abstract

This study presents new empirical evidence regarding the impact of e-commerce adoption on employment in Colombia, a developing economy. We use firm-level data from the Annual Manufacturing Survey between 2013 and 2018 and differentiate the workforce by skill level and type of contract. We also use multiple correspondence analysis (MCA) to construct a parsimonious set of instrumental variables to account for the endogeneity of e-commerce. Our main finding is that an increase of 1% in the degree of e-commerce penetration increases demand for skilled workers by 0.2% and does not have a negative impact in the demand for unskilled workers. We then delve deep into the evidence and test for complementarity or substitution between skilled labor and ICT capital related to e-commerce implementation by employing a new and specific theoretical framework, which is empirically assessed. Our results confirm that highly skilled workers benefit the most from the introduction of e-commerce and its associated ICTs into a company, exhibiting a high degree of complementarity compared to unskilled workers. Thus, our findings support the hypothesis that ICT utilization and e-commerce adoption lead to labor substitution, particularly for low skill workers. This study recommends that policymakers invest in skill development to meet e-commerce demands, focusing on both upskilling workers to enhance digital literacy and implementing targeted support programs for a smooth transition to the digital economy across all skill levels.