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on Efficiency and Productivity |
| By: | Ando, Yoshiki; Bessen, James; Wang, Xiupeng |
| Abstract: | R&D investment has grown robustly, yet aggregate productivity growth has stagnated. Is this because “ideas are getting harder to find”? This paper uses micro-data from the US Census Bureau to explore the relationship between R&D and productivity in the manufacturing sector from 1976 to 2018. We find that both the elasticity of output (TFP) with respect to R&D and the marginal returns to R&D have risen sharply. Exploring factors affecting returns, we conclude that R&D obsolescence rates must have risen. Using a novel estimation approach, we find consistent evidence of sharply rising technological rivalry. These findings suggest that R&D has become more effective at finding productivity-enhancing ideas but these ideas may also render rivals’ technologies obsolete, making innovations more transient. |
| Keywords: | R&D, innovation, productivity, obsolescence |
| JEL: | L10 O32 O33 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124764 |
| By: | Machin, Stephen |
| Abstract: | The UK’s economic performance since the global financial crisis has seen real wage growth stagnating for over fifteen years and weak productivity growth with most, but not all, of the wage stagnation overlapping with the productivity slowdown. This paper studies these stagnation patterns in detail for the UK, and places them in international context where the country does not fare well as it both drops down wage and productivity growth rankings across countries. There has been a longer term decline in the influence of labour market institutions in affecting worker wages as the changing balance of power between workers and employers has played a role in the emerging wedge between wage and productivity growth in the stagnation period. The paper concludes with a policy related discussion of possible sources where sustained wage growth could re-emerge, and thereby generate improvements in living standards, in the future. |
| Keywords: | real wage growth; productivity growth; employer and worker power |
| JEL: | J31 J38 J42 J51 |
| Date: | 2025–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127594 |
| By: | Emilio Colombo; Luca Michele Portoghese; Patrizio Tirelli |
| Abstract: | Is the roll-out of (fast)broadband connections a driver of firms' total factor productivity (TFP) growth in the European Union? Does broadband generate convergence or polarisation? In this regard, which firms benefit most from a broadband connection and is the traditional divide between rural and urban deployment areas important? To answer these questions, we estimate the effects of broadband coverage shocks on individual firms' TFP growth, exploiting broad firm-level coverage from the ORBIS dataset and a relatively long time span (2011–2022) over which broadband shocks are observed. Broadband shocks permanently raise firms' TFP, but their effect is uneven: fast-growth firms improve their relative position. They are more beneficial for the TFP of firms in non-digital sectors, supporting the view that internet connectivity is a general-purpose technology. Firms in urban areas are also better equipped to benefit from increased broadband connectivity. TFP responses to fast-broadband shocks are almost muted. |
| JEL: | L25 D24 L9 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:dis:wpaper:dis2504 |
| By: | Shijun Gu; Chengcheng Jia |
| Abstract: | Can the expansion of higher education lead to firm productivity growth? In this paper, we examine how China's college expansion program contributes to the rapid growth of firms' R&D expenditure and productivity. In our model, heterogeneous firms make endogenous R&D decisions, requiring them to allocate skilled workers between production and R&D. We structurally estimate the model using firm-level data on the level and distribution of R&D, as well as macro-level data on skill prices and sectoral allocation. Quantitative analysis reveals that between 2004 and 2018, the combination of the R&D-sector-biased technology shock, the skill-biased technology shock, and the skilled-labor supply shock leads to a 12 percent increase in total factor productivity (TFP), of which one-fifth is explained by the rising supply of skilled labor. Counterfactual analysis shows that a further increase in the share of skilled labor has the potential to increase TFP by an additional 2 percent, but the marginal effect diminishes due to the rising wages of unskilled labor. |
| Keywords: | R&D; TFP; skilled labor; college expansion; Chinese economy |
| JEL: | J24 O31 O32 |
| Date: | 2025–06–23 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:101133 |
| By: | Miguel D. Ramirez (Department of Economics, Trinity College) |
| Keywords: | Dynamic Ordinary Least Squares (DOLS), Fully Modified Ordinary Least Squares (FMOLS), economic output, Gregory-Hansen cointegration single-break test, public capital stock, Johansen Cointegration test, labor productivity, KPSS no unit root test, single-break (Zivot-Andrews) unit root test, and vector error correction model (VECM). |
| JEL: | C22 O40 O54 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:tri:wpaper:2502 |
| By: | Alex Farach; Alexia Cambon; Jared Spataro |
| Abstract: | As the digital economy grows increasingly intangible, traditional productivity measures struggle to capture the true economic impact of artificial intelligence (AI). AI systems capable of cognitive work significantly enhance productivity, yet their contributions remain obscured within the residual category of Total Factor Productivity (TFP). This paper explores whether it is time for a conceptual shift to explicitly recognize "digital labor, " the autonomous cognitive capability of AI, as a distinct factor of production alongside capital and human labor. We outline the unique economic properties of digital labor, including scalability, intangibility, self-improvement, rapid obsolescence, and elastic substitutability. By integrating digital labor into growth models (such as those by Solow and Romer), we demonstrate strategic implications for business leaders, including new approaches to productivity tracking, resource allocation, investment strategy, and organizational design. Ultimately, treating digital labor as an independent factor offers a clearer view of economic growth and helps organizations manage AI's transformative potential. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.09408 |
| By: | Aghion, Philippe; Bunel, Simon; Jaravel, Xavier; Mikaelsen, Thomas; Roulet, Alexandra; Søgaard, Jakob |
| Abstract: | Using French firm-level data on AI adoption from 2017-2020, we find that, first, firms adopting AI are larger and more productive and skill intensive. Second, difference-in-difference estimates reveal an increase in firm-level employment and sales after AI adoption, suggesting that the induced productivity gains allow firms to grow and outweigh potential displacement effects. Third, occupations classified in recent work as substitutable with AI expand. Fourth, AI usage is a relevant dimension of heterogeneity in the labor demand response: We find positive employment growth for certain uses (e.g., information and communications technology security) and negative for others (e.g., administrative processes). |
| JEL: | R14 J01 |
| Date: | 2025–05–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128375 |
| By: | Ronald B. Davies; Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Francesca Guadagno (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | The hope that multinational firms will improve local employment and productivity is a driving force behind policy efforts to attract investment. Such spillovers are often motivated by technological spillovers from foreign to domestic firms. We address this possibility by using the patenting activity of foreign multinationals in Europe as a measure of affiliate activity alongside more traditional proxies. We find that local firms’ employment and labour productivity is higher when FDI activity increases, particularly when those multinationals are upstream of locals. Furthermore, this effect is particularly significant among domestic patenting firms. Thus, it seems that the benefits of inbound investment are greatest for local innovators who are exposed to inbound innovating foreigners. |
| Keywords: | spillovers; Foreign Direct Investment; Patents |
| JEL: | F23 O24 O33 O34 Q55 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:265 |
| By: | Rikard FORSLID; Toshihiro OKUBO |
| Abstract: | This paper explores how firm’s internalization strategies - specifically exporting and foreign direct investment (FDI) - relate to their product scope. We develop a model incorporating firm heterogeneity and multi-product firms. The most productive firms engage in FDI and produce the broadest range of products. Firms with intermediate productivity levels tend to export, offering fewer product varieties than FDI firms. In contrast, low-productivity firms typically operate domestically and have the smallest product scope. The model also predicts that the ratio of the product scope of exporters and domestic firms and the ratio of FDI firms and exporters should decline as the difficulty of expanding the product scope increases. The Japanese firm-level data support the theoretical predictions. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25053 |
| By: | Ferreira, Bianca; Ndiaye, Fatima; Silva, Costa |
| Abstract: | This paper examines the application of financial ratios and panel data analysis in evaluating firm performance and socio-economic dynamics. Through a systematic review of recent literature, we highlight how financial ratios—such as liquidity, profitability, and leverage metrics—serve as critical diagnostic tools for assessing corporate health, particularly in crisis contexts. Meanwhile, panel data analysis enhances longitudinal insights, enabling researchers to identify causal relationships and long-term trends across industries and economies. Our synthesis reveals methodological gaps, including the underutilization of hybrid approaches that integrate ratio analysis with advanced econometric techniques. By bridging these analytical approaches, researchers can generate more robust insights for financial decision-making and policy formulation. |
| Keywords: | Financial Ratios, Panel Data Analysis, Firm Performance, Corporate Resilience |
| JEL: | M41 |
| Date: | 2025–05–08 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124723 |
| By: | Aksoy, Cevat Giray (European Bank for Reconstruction and Development); Bloom, Nicholas (Stanford University); Davis, Steven J. (Hoover Institution); Marino, Victoria (EBRD, London); Özgüzel, Cem (Paris School of Economics) |
| Abstract: | We study the shift to fully remote work at a large call center in Turkey, highlighting three findings. First, fully remote work increased the share of women, including married women, rural and smaller-town residents. By accessing groups with traditionally lower labor-force participation the firm was able to increase its share of graduate employees by 14% without raising wages. Second, workforce productivity rose by 10%, reflecting shorter call durations for remote employees. This was facilitated by a quieter home working environment, avoiding the background noise in the office. Third, fully remote employees with initial in-person training saw the higher long-run remote productivity and lower attrition rates. This underscores the advantages of initial in-person onboarding for fully remote employees. |
| Keywords: | work from home, remote jobs, workforce mix, productivity |
| JEL: | J2 J3 R1 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17917 |