In this study we use a unique database covering 25 manufacturing and service sectors for 16 European countries over the period 1996-2005, for a total of 2,295 observations, and apply GMM-SYS panel estimations of a demand-for-labour equation augmented with technology. We find that R&D expenditures have a job-creating effect, in accordance with the previous theoretical and empirical literature discussed in the paper. Interestingly enough, the labour-friendly nature of R&D emerges in both the flow and the stock specifications. These findings provide further justification for the European Lisbon-Barcelona targets.
