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on Economic Growth |
| By: | Enrico Moretti; Claudia Steinwender; John Van Reenen |
| Abstract: | In the US and many other OECD countries, expenditures for defense-related R&D represent a key policy channel through which governments shape innovation, and dwarf all other public subsidies for innovation. We examine the impact of government funding for R&D - and defense-related R&D in particular - on privately conducted R&D, and its ultimate effect on productivity growth. We estimate models that relate privately funded R&D to lagged government-funded R&D using industry-country level data from OECD countries and firm level data from France. To deal with the potentially endogenous allocation of government R&D funds we use changes in predicted defense R&D as an instrumental variable. In both datasets, we uncover evidence of “crowding in” rather than “crowding out,” as increases in government-funded R&D for an industry or a firm result in significant increases in private sector R&D in that industry or firm. A 10% increase in government-financed R&D generates 4.3% additional privately funded R&D. An analysis of wages and employment suggests that the increase in private R&D expenditure reflects actual increases in R&D employment, not just higher labor costs. Our estimates imply that some of the existing cross-country differences in private R&D investment are due to cross-country differences in defense R&D expenditures. We also find evidence of international spillovers, as increases in government-funded R&D in a particular industry and country raise private R&D in the same industry in other countries. Finally, we find that increases in private R&D induced by increases in defense R&D result in significant productivity gains. |
| JEL: | O3 O30 O31 O33 O38 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26483&r=all |
| By: | Nicholas Crafts; Alexander Klein |
| Abstract: | We re-examine the long-run geographical development of U.S. manufacturing industries using recent advances in spatial concentration measures. We construct spatially-weighted indices of the geographical concentration of U.S. manufacturing industries during the period 1880 to 1997 using data from the Census of Manufactures and Bureau of Labor Statistics. Doing so we improve upon the existing indices by taking into account industrial structure and checkerboard problem. Several important new results emerge. First, we find that average spatial concentration was much lower in the late 20th- than in the late 19th-century and that this was the outcome of a continuing reduction over time. Second, spatial concentration of industries did not increase in early twentieth century as shown by traditional indices but rather declined, implying that we do not find an inverted-U shape pattern of long-run spatial concentration. Third, the persistent tendency to greater spatial dispersion was characteristic of most manufacturing industries. Fourth, even so, economically and statistically significant spatial concentration was pervasive throughout this period. |
| Keywords: | manufacturing belt; spatial concentration; transport costs |
| JEL: | N62 N92 R12 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:1910&r=all |
| By: | Jakub Growiec (Department of Quantitative Economics, Warsaw School of Economics, Poland; Rimini Centre for Economic Analysis) |
| Abstract: | The article proposes a new conceptual framework for capturing production, R&D, and economic growth in aggregative economic models which extend their horizon into the digital era. Two key factors of production are considered: hardware, including physical labor, traditional physical capital and programmable hardware, and software, encompassing human cognitive work and pre-programmed software, including artificial intelligence (AI). Hardware and software are complementary in production whereas their constituent components are mutually substitutable. The framework generalizes, among others, the standard model of production with capital and labor, models with capital–skill complementarity and skill-biased technical change, and unified growth theories embracing also the pre-industrial period. It offers a clear conceptual distinction between mechanization and automation of production. It delivers sharp, empirically testable and economically intuitive predictions for long-run growth, the evolution of factor shares, and the direction of technical change. |
| Keywords: | production function, R&D equation, technological progress, complementarity, automation, artificial intelligence |
| JEL: | O30 O40 O41 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:19-18&r=all |
| By: | Fukao, Kyoji (Hitotsubashi University); Paul, Saumik (Newcastle University) |
| Abstract: | This paper examines the drivers of the long-run structural transformation in Japan. We use a dynamic input-output framework that decomposes the reallocation of the total output across sectors into two components: the Engel effect (demand side) and the Baumol effect (supply side). To perform this task, we employ 13 seven-sector input-output tables spanning 100 years (1885 to 1985). The results show that the Engel effect was the key explanatory factor in more than 60% of the sector-period cases in the pre-WWII period, while the Baumol effect drove structural transformation in more than 75% of such cases in the post-WWII period. Detailed decomposition results suggest that in most of the sectors (agriculture, commerce and services, food, textiles and transport, communication and utilities), changes in private consumption were the dominant force behind the demand-side explanations. The Engel effect was found to be the strongest in the commerce and services sector, which contributed to the rapid growth of GDP in Japan throughout the 20th century. |
| Keywords: | long-run structural transformation, the Engel effect, Baumol's cost disease effect, sectoral productivity growth |
| JEL: | O40 O10 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12727&r=all |
| By: | Gasmi, Farid; Couvet, Denis; Recuero Virto, Laura |
| Abstract: | In a dataset on 83 countries covering the years 1960 through 2009, we find a negative indirect effect of the share of renewable natural capital in wealth on economic growth transmitted through demographic factors, more specifically, population fertility. In contrast, in countries with lower income inequality and higher institutional quality, the share of non-renewable natural capital in wealth has a direct positive impact on growth. We also find that countries with higher income per capita, human development, and institutional quality have a higher share of renewable natural capital per capita, but a lower share of renewable natural capital in wealth. Renewable natural capital is thus valuable for the population and of primary concern for empowered countries, even though it contributes less to wealth and economic growth. Our results raise serious questions about the way wealth and growth are defined in economics when one investigates the impact of natural capital and point to the importance of preserving natural capital, particularly, in less developed countries. |
| Keywords: | Natural capital; renewable; non-renewable; economic growth. |
| JEL: | O10 O13 Q20 Q30 Q32 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:123807&r=all |
| By: | Zanella, Giulio (University of Adelaide); Bellani, Marina M. |
| Abstract: | Common measures of cultural attitudes, such as those constructed from the World Values Survey, are characterized by substantial within-country volatility. This volatility is at odds with the notion of culture adopted in economics: a set of slow-moving traits that determine preferences and expectations transmitted from one generation to the next via family or social interactions. The insufficient persistence of survey proxies for such traits may compromise empirical studies of culture as a determinant of economic outcomes. We illustrate this point via a thorough replication, using the most recent WVS waves, of analyses carried out previously for regions in Europe. |
| Keywords: | World Values Survey, culture, development |
| JEL: | O12 O43 Z1 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12730&r=all |
| By: | Antoine Dechezleprêtre; Nicholas Rivers; Balazs Stadler |
| Abstract: | This study provides the first evidence that air pollution causes economy-wide reductions in market economic activity based on data for Europe. The analysis combines satellite-based measures of air pollution with statistics on regional economic activity at the NUTS-3 level throughout the European Union over the period 2000-15. An instrumental variables approach based on thermal inversions is used to identify the causal impact of air pollution on economic activity. The estimates show that a 1μg/m3 increase in PM2.5 concentration (or a 10% increase at the sample mean) causes a 0.8% reduction in real GDP that same year. Ninety-five per cent of this impact is due to reductions in output per worker, which can occur through greater absenteeism at work or reduced labour productivity. Therefore, the results suggest that public policies to reduce air pollution may contribute positively to economic growth. Indeed, the large economic benefits from pollution reduction uncovered in the study compare with relatively small abatement costs. Thus, more stringent air quality regulations could be warranted based solely on economic grounds, even ignoring the large benefits in terms of avoided mortality. |
| Keywords: | air pollution, economic output, instrumental variables, thermal inversions |
| JEL: | J24 O13 Q53 Q51 R11 |
| Date: | 2019–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1584-en&r=all |