Automation and labor market dynamics in Bangladesh evidence from an ARDL model

Abstract

Abstract Achieving sustainable and inclusive labour market outcomes amid rapid technological change has become an important challenge for developing economies. Against this backdrop, this study examines the relationship between automation-related technological innovation and unemployment in Bangladesh over the period 1996–2021 using the Autoregressive Distributed Lag (ARDL) bounds testing approach. Due to the absence of direct measures of automation, industrial design applications are employed as an indirect proxy for automation-related technological innovation. The analysis further incorporates gross domestic product (GDP) growth, ICT service exports, and gross fixed capital formation (GFCF) to account for broader macroeconomic conditions. The findings reveal that the relationship between automation-related technological innovation and unemployment differs across time horizons. In the long run, the automation and ICT service exports are negatively and significantly associated with unemployment, whereas GFCF exhibits a positive and significant association. GDP growth is also negatively associated with unemployment in the long run. In the short run, the automation displays a positive significant association with unemployment, while GDP, ICT service exports, and GFCF do not exhibit statistically significant short-run association. The error-correction term confirms a stable long-run equilibrium and indicates a relatively rapid adjustment toward equilibrium following short-run shocks. Given the observational nature of the analysis and the use of an indirect proxy, the findings should be interpreted as empirical associations rather than definitive causal effects. Overall, the results suggest that technological innovation, when supported by appropriate skills development, technological adaptation, and labour market policies, may contribute to sustainable and inclusive economic transformation in Bangladesh, with implications for Sustainable Development Goal 8 (Decent Work and Economic Growth) and Sustainable Development Goal 9 (Industry, Innovation and Infrastructure).