When does green innovation create jobs? Asymmetric employment effects across booms, recessions, and time lags

This study contributes to the green innovation–employment literature by showing that the association between green innovation and employment varies systematically across business-cycle conditions and over time. Using a balanced panel of Organisation for Economic Co-operation and Development economies, the analysis applies heterogeneous panel estimators that account for cross-country dependence, slope heterogeneity, common shocks and potential endogeneity. The results reveal substantial cyclical asymmetry. In the non-cyclical specification, green innovation is positively associated with national employment. This association strengthens considerably during booms, peaking after one year before moderating after two years. In contrast, green innovation is negatively associated with employment during recessions, although this negative association gradually weakens over the following two years. Average annual wages are consistently negatively associated with employment, whereas gross fixed capital formation, trade openness and remittances generally exhibit positive associations. Both green innovation and aggregate employment are procyclical, while alternative business-cycle definitions preserve the main regime-dependent pattern. Policy should therefore combine sustained support for green innovation with complementary investment and labour-market measures, particularly during economic downturns.