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on Innovation |
| By: | Borrás , Susana (Department of Business and Politics, Copenhagen Business School, and CIRCLE, Lund University); Edquist , Charles (CIRCLE, Lund University) |
| Abstract: | Who produces scientific and technical knowledge these days? What type of knowledge is being produced and for what purposes? Why are firms and governments funding research and development? This chapter studies the role of knowledge production (especially R&D activities) in the innovation process from an innovation system perspective. It examines how governments and public agencies in different countries and at different times have actually approached the issue of building, maintaining and using knowledge production in their innovation systems. It also examines the critical and most important issues at stake from the point of view of innovation policy, looking in particular at the unresolved tensions and systemic unbalances related to knowledge production and last but not least, it elaborates a set of overall criteria for the selection and design of relevant policy instruments and addresses those tensions and unbalances. This chapter suggests that innovation policy develops a portfolio approach to the public investment in R&D and knowledge production. |
| Keywords: | Innovation system; innovation policy; knowledge production; R&D; universities; innovation policy instruments |
| JEL: | L38 M38 O25 O31 O32 O33 |
| Date: | 2014–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2014_021&r=ino |
| By: | Antoine Dechezleprêtre; Ralf Martin; Myra Mohnen |
| Abstract: | How much should governments subsidize the development of new clean technologies? We use patent citation data to investigate the relative intensity of knowledge spillovers in clean and dirty technologies in two technological fields: energy production and transportation. We introduce a new methodology that takes into account the whole history of patent citations to capture the indirect knowledge spillovers generated by patents. We find that conditional on a wide range of potential confounding factors clean patents receive on average 43% more citations than dirty patents. Knowledge spillovers from clean technologies are comparable in scale to those observed in the IT sector. The radical novelty of clean technologies relative to more incremental dirty inventions seems to account for their superiority. Our results can support public support for clean R&D. They also suggest that green policies might be able to boost economic growth through induced knowledge spillovers. |
| Keywords: | Innovation spill-overs, Climate Change, Growth, Patents, Clean technology, Optimal climate policy |
| JEL: | O30 O44 Q54 Q55 Q58 H23 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1300&r=ino |
| By: | Ufuk Akcigit (University of Pennsylvania); Murat Celik (University of Pennsylvania); Daron Acemoglu (Massachusetts Institute of Technology) |
| Abstract: | This paper argues that openness to new, unconventional and disruptive ideas has a first-order impact on creative innovations---innovations that break new ground in terms of knowledge creation. After presenting a motivating model focusing on the choice between incremental and radical innovation, and on how managers of different ages and human capital are sorted across different types of firms, we provide cross-country, firm-level and patent-level evidence consistent with this pattern. Our measures of creative innovations proxy for innovation quality (average number of citations per patent) and creativity (fraction of superstar innovators, the likelihood of a very high number of citations, and generality of patents). Our main proxy for openness to disruption is manager age. This variable is based on the idea that only companies or societies open to such disruption will allow the young to rise up within the hierarchy. Using this proxy at the country, firm or patent level, we present robust evidence that openness to disruption is associated with more creative innovations. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:377&r=ino |
| By: | Sanchez, Juana |
| Abstract: | This paper presents a novel empirical study of innovation practices of U.S. companies and their relation to productivity levels using new business micro data from the Business Research and Development and Innovation Survey (BRDIS) for the years 2008-2011. The paper follows the work of Frenz and Lambert, who use factor analysis to reduce a set of inputs and outputs of innovation activities into four latent unobserved innovation modes or practices for OECD countries using Community Innovation Surveys (CIS). Patterns obtained with BRDIS data are very similar to those found by those authors in some OECD countries. Companies are grouped according to their scores across the four factors to see that in large, small and medium companies more than one mode of innovation practices prevails. The next step in the analysis links different types of innovation practices to levels of productivity using regression analysis. The four innovation modes have a statistically signifcant positive relation with the level of productivity, other things constant. The paper demonstrates the possibility of taking into account the multidimensionality of innovation without the use of composite indicators. |
| Keywords: | Innovation, R&D, Productivity, Cluster, Latent Modes, Regression |
| JEL: | O31 O32 O33 O34 O4 |
| Date: | 2014–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58719&r=ino |
| By: | Dechezlepretre, A; Martin, R; Mohnen, M |
| Date: | 2014–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:imp:wpaper:17753&r=ino |
| By: | Attila Havas (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences) |
| Abstract: | Business-academia (B-A) collaborations have been analysed by an extensive body of literature, taking many different angles, and using various sources and types of information (patent statistics, the Community Innovation Survey data, evidence from specific surveys, interviews, or case studies), but usually a given paper is relying on a single method, addressing one or two major research questions. In contrast, this paper tackles both R&D and innovation collaborations among businesses and academia relying on information from different statistics and interviews. The latter source also allows exploring motivations for, and major features of, business-academia co-operation. The paper argues that mapping B-A collaborations by using multiple methods and multiple sources of information can significantly improve the reliability and richness of our understanding, and can offer insights on dynamics and qualitative features of these co-operation processes. Interviews conducted in Hungary – in line with other research findings – have also confirmed that (i) motivations, incentives for, and norms of, conducting R&D and innovation activities diametrically differ in business and academia; and (ii) different types of firms have different needs. Thus, more refined policy measures are to be devised to promote B-A collaboration more efficiently, better tuned to the needs of the actors, based on a relevant taxonomy of their co-operations. Evaluation criteria for academics should also be revised to remove some major obstacles, currently blocking more effective B-A co-operation. Several findings presented in this paper can be generalised beyond the cases considered, but the research design to analyse B-A collaborations and the concomitant policy recommendations always need to be tailored to the innovation systems in question. |
| Keywords: | Types of knowledge; Business-academia collaboration; Multiple methods to map business-academia collaborations; STI policy implications |
| JEL: | O38 O33 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1419&r=ino |
| By: | Basu, Sujata |
| Abstract: | An advanced economy relies on innovation activity for its further technology improvement. On the other hand a backward economy depends on both imitation from the world technology frontier and innovation activities - innovation being more skilled-intensive than imitation. In this paper I theoretically examine the impact of R & D outsourcing from an economy which is in the innovation-only regime to an imitation-innovation regime. I show that dependence on imitation activities rises and as a consequence of which share of skilled human capital falls and both skilled and unskilled human capital shifts from innovation to imitation activities in the backward economy. As a result proportion of outsourcing from advanced economy to backward economy falls. Thus, growth rate of the backward economy declines as time progresses. In the long run backward economy will get into a trap and gap from the world technology frontier rises, even if it falls in the initial period. |
| Keywords: | R & D activity, outsourcing, economic growth, imitation-innovation, convergence |
| JEL: | I24 O3 O43 |
| Date: | 2014–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59107&r=ino |
| By: | Aristovnik, Aleksander |
| Abstract: | The main aim of the paper is to measure the relative efficiency of the R&D sector in the EU-27 at the regional level. For this purpose, the paper applies a non-parametric approach, i.e. data envelopment analysis (DEA), to assess the relative technical efficiency of R&D activities across selected EU (NUTS-2) regions. The empirical analysis integrates available inputs (R&D expenditures, researchers and employment in high-tech sectors) and outputs (patent and high-tech patent applications) over the 2005–2010 period. The empirical results show that among regions with a high intensity of R&D activities the most efficient performers are Noord-Brabant (Netherlands), Stuttgart (Germany) and Tirol (Austria). In contrast, a wide range of NUTS-2 regions from the Baltics, Eastern and Southern Europe is characterized by an extremely low rate of knowledge production and its efficiency, particularly in Poland (Mazowieckie), Lithuania (Lietuva), Latvia (Latvija), Romania (Bucuresti-Ilfov), Bulgaria (Yugozapaden), Slovakia (Západné Slovensko), Greece (Attiki), Spain (Canarias) and Italy (Sardegna). |
| Keywords: | Data Envelopment Analysis (DEA); Efficiency; EU; NUTS-2 regions; R&D |
| JEL: | C61 O3 R1 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59081&r=ino |
| By: | Waters, James |
| Abstract: | Financing innovation presents informational and control problems for the financier, and different solutions are used for funding of US companies and universities. In this paper we examine how funding characteristics influenced the change in innovation during the 2007-8 financial crisis for both. We extend prior theories of external financing’s effect on company performance during crises, firstly to university performance, and secondly to show the influence of time variation in aggregate funding. Empirical results are consistent with our theory: external dependence and asset intangibility had a limited effect on company innovation on entering the crisis, but increased university innovation. Overall, however, company patenting was more robust than university patenting, despite the out-performance being masked by respective portfolio characteristics. |
| Keywords: | Innovation; patenting; economic crisis; financing constraint |
| JEL: | G32 L14 O31 |
| Date: | 2014–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59016&r=ino |
| By: | Billette de Villemeur, Etienne; Ruble, Richard; Versaevel, Bruno |
| Abstract: | We study entry in a growing market by ex-ante symmetric duopolists when sunk costs differ for the innovating and imitating firm. Strategic competition takes the form either of a preemption race or of a war of attrition, the latter being likelier when demand uncertainty is high. Industry value is maximized when firms seek neither to race nor to delay investment. Free imitation is socially costly, and if the consumer surplus resulting from imitation is not too large the socially optimal imitation cost, as may be induced by patent protection, involves preemption. Finally, we discuss endogenous entry barriers and contractual alternatives that increase the likelihood of preemption regimes, with differing implications for imitator entry. When the cost of imitation is low for instance, innovators are shown to rely more heavily on trade secrecy and patents. Welfare-enhancing takeovers and licensing are also shown to occur. |
| Keywords: | Dynamic oligopoly; Knowledge spillover; Real options |
| JEL: | G31 L13 O33 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59453&r=ino |
| By: | Setsuo YAMADA |
| Abstract: | This paper aims to construct a patent option model suitable for the Japanese patent system, and then to explore empirically the economic effects caused by the significant revision of the Japanese patent maintenance fees in 1998. The revision of patent law in 1998 fundamentally changed the fee schedule so that payments peaked in ten to twelve year after patent registration, followed by a level off, which resulted in major fee reductions. This was a very bold change in the patent fee structure compared to historical structures of patent fee maintenance in Japan and other major countries. The leveling-off of patent maintenance fees was aimed to reduce cost burden on patent owners and to give incentives to their R&D activities. In addition, it served to contain the special patent account's rising surplus. The simulation results based on the patent option model show that the introduction of the leveling-off maintenance fees enables the patent to hold the patent term longer, while minimizing the influence on the patent option value. However, it is confirmed to have a relatively substantial effect on reducing patent fee revenues. |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:esj:esriea:186d&r=ino |
| By: | NAGAOKA Sadao; OWAN Hideo; ONISHI Koichiro |
| Abstract: | Given the expected fundamental reform of Article 35 of the Japanese patent law, which has been governing the transfer of ownership of employee inventions to firms, the freedom of designing the incentive system for inventors would increase significantly. In order to provide basic guiding principles for such design as well as for complementary policy measures, this paper presents new empirical evidence derived from the analyses using inventor surveys as well as insights from the survey of the theoretical literature on the optimal incentive scheme for innovation. Major findings are the following: while a variety of motivations drive inventions, intrinsic motivations such as satisfaction from solving challenging technical problems and that from contribution to scientific and technical progress are especially important, and inventions that are importantly driven by such motivations tend to have high inventive-step as well as high economic value. A wide menu of economic incentives for an inventor is available such as payment at invention disclosure and patent application, payment based on the commercialization of the patent, research freedom, promotion, salary increase, as well as their combinations. Evidence suggests that high quality inventions in Japan are significantly associated with a promotion and/or a salary increase for the inventor. The theory of incentive designs also suggests that a multitude of factors must be taken into account in the incentive design, including the risk bearing capability of an inventor, the monitoring possibility of a firm, research and development (R&D) characteristics, and the commitment power of a firm to long-term incentive. We further argue that the characteristics of the workforce sorted into the firm should also be considered in designing the optimal incentive scheme, as the data show that the effect of monetary incentives declines with the strength of the intrinsic motivations. Given the expected heterogeneity in the optimal incentive systems, it is imperative that firms compete in designing better incentive system for innovations. An important prerequisite for this is the freedom to design a clear ex-ante rule on the transfer of employee inventions' ownership. The government has to ensure that the contract and the agreement on the incentive system between the management and the employees to be respected as well as to support inventions with high spillover effects which otherwise might not be undertaken due to relatively small private benefits for the inventing firm. |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:14044&r=ino |
| By: | Chaminade , Cristina (CIRCLE, Lund University); Padilla Pérez , Ramón (United Nations Economic Commission for Latin America and the Caribbean) |
| Abstract: | This paper aims at shedding some light on the challenges of designing and implementing STI policies in developing countries. In particular, we discuss the problems of alignment of STI policies with the national economic development agenda, the alignment of innovation system policy with ST policies, the alignment of objectives and instruments with systemic problems as well as a proposed method for the identification of systemic problems in systems of innovation in developing countries. |
| Keywords: | innovation policy; science and technology policy; developing countries |
| JEL: | O25 O33 O38 |
| Date: | 2014–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2014_026&r=ino |
| By: | Najda-Janoszka, Marta |
| Abstract: | Numerous studies challenge the ultimately advantageous position of innovators and indicate that imitation, in the whole spectrum of its diverse forms, generates a considerable potential for enhancing the competitiveness of the followers and shaping the path for effective surpassing the innovators. The emerging literature suggest strategic integration of innovative and imitative practices in order to achieve above average profits. Therefore, in this article imitation is considered on par with innovation as an alternative strategic option for successful business performance. The article presents the fundamental conditions affecting the managerial decision on the model of value creation for particular project or its modules |
| Keywords: | innovation, imitation, value creation process |
| JEL: | M10 O30 O33 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58609&r=ino |
| By: | Claire Nauwelaers; Karen Maguire; Giulia Ajmone Marsan |
| Abstract: | The Bothnian Arc is a cross-border area on the border of Finland and Sweden that covers the most populated areas along the upper Bothnian Bay, spanning 800 kilometres. It has a population of around 710 000, across 55 000 km² with an economic output of USD 31 billion. The Bothnian Arc collaboration was initiated by local authorities, with strong commitment of the mayors of the cities of Oulu and Luleå (300 kilometres apart). Despite a peripheral location in all respects, some parts of the Bothnian Arc have shown a remarkable vitality, notably Oulu (Finland), driven by an innovation ecosystem that builds on the heritage of Nokia and the contribution of Oulu University. Luleå (Sweden) has recently attracted the European Facebook data centre. The area is looking to go beyond ad hoc projects for a more strategic approach to innovation-driven collaboration to be the dynamic hub of the north. This case study is part of the project Regions and Innovation: Collaborating Across Borders . A summary of this working paper appears in a report of the same name. |
| Keywords: | Sweden, Finland, innovation, science and technology, regional growth, cross-border, regional development, regional innovation strategies, Bothnian Arc, Oulu, regional innovation, Luleä |
| JEL: | L52 L53 O14 O18 O38 R11 R58 |
| Date: | 2013–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:oec:govaab:2013/17-en&r=ino |
| By: | Giovanni Immordino; Michele Polo |
| Abstract: | We study the interaction of a firm that invests in research and, if successful, undertakes a practice to exploit the innovation, and an enforcer that sets legal standards, fines and accuracy. In this setting deterrence on actions interacts with deterrence on research. When the practice increases expected welfare the enforcer commits not to intervene by choosing a more rigid per-se legality rule to boost investment, moving to a more flexible discriminating rule combined with type-I accuracy for higher probabilities of social harm. Patent and antitrust policies act as substitutes in our setting; additional room for per-se (illegality) rules emerges when fines are bounded. Our results on optimal legal standards extend from the case of (uncertain) investment in research to the case of (deterministic) investment in physical assets. |
| Keywords: | legal standards, accuracy, antitrust, innovative activity, enforcement. |
| JEL: | D73 K21 K42 L51 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp54&r=ino |
| By: | Giuliani , Elisa (Dept. Economics & Management, University of Pisa); Martinelli , Arianna (LEM – Scuola Superiore Sant’Anna); Rabellotti , Roberta (Department of Political and Social Sciences, Università di Pavia) |
| Abstract: | Firms from emerging countries such as Brazil, India, and China (BIC) are going global, and Europe is attracting around one-third of their direct outward investments. Growing internationalization constitutes an opportunity for technological catch up. In this paper we analyze BIC firms’ cross-border inventions with European Union (EU-27) actors, during the period 1990-2012. Our results suggest that cross-border inventions represent an opportunity for BIC firms to accumulate technological capabilities, access frontier knowledge, and appropriate the property rights of co-inventions. This paper contributes to the understanding of the catching up process by emerging country firms, and offers some policy recommendations. |
| Keywords: | emerging countries; multinationals; technological catch up; patents; European Union |
| JEL: | O10 O30 O34 |
| Date: | 2014–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2014_025&r=ino |
| By: | Unay Gailhard, ilkay; Bavorova, Miroslava |
| Abstract: | The purpose of this study is to examine the influence of interpersonal networks and other information sources on the innovativeness of farmers. This understanding can be useful for organizations that are involved in extension work that aims to increase the farmers’ innovativeness and for farmers who aim to be more innovative. The study focuses on two types of farmers’ network ties: friendship ties (ties to other farmers) and affiliation ties (ties to associations). Additionally, the importance of information gathered by farmers from interpersonal sources and from media is compared. We collected data within the European Union (EU)-funded Food Industry Dynamics and Methodological Advances (FOODIMA) Project using face-to-face interviews. Our sample, which consists of 72 farmers (organic and conventional) in Germany, was used to map farmers’ innovativeness (number of innovations adopted). We analyzed the data to determine if the structure and strength of network ties can be used as predictors of innovativeness for organic and conventional farmers. When considering both the friendship and affiliation ties, the main results show that organic farmers who communicate more frequently with other farmers are more likely to be highly innovative. The large network size indicates low innovativeness on the part of organic farmers. Membership in at least one association is positively interconnected with high innovativeness of conventional farmers. Regarding information sources, the results indicate that the highly innovative farmers appreciate information from research institutes more and information from agricultural organization less than the less innovative farmers. |
| Keywords: | Innovativeness; Social network ties; Communication frequency; Information sources; Organic and conventional farmers |
| JEL: | Q5 Q55 Q57 R14 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58331&r=ino |
| By: | Florida, Richard (University of Toronto’s Rotman School of Management and Global Research Professor at NYU); Mellander , Charlotta (Prosperity Institute of Scandinavia, Jönköping International Business School (JIBS), & Centre of Excellence for Science and Innovation Studies (CESIS), Sweden.) |
| Abstract: | The prevailing geographic model for high-technology industrial organization has been the “nerdistan,” a sprawling, car-oriented suburb organized around office parks, of which Silicon Valley is the prototypical example. This seems to contradict a basic insight of urban theory, which associates dense urban centers with higher levels of innovation, entrepreneurship and creativity. Our research examines the geography of recent venture capital finance startups in the United States across metros and within a subset of them by neighborhood and finds compelling evidence that the model is changing. Venture capital investments are clustering in larger, denser urban centers with high levels of human capital, like San Francisco and Lower Manhattan, as well as in walkable suburbs. We suggest that the suburban model might have been an historical aberration, and that innovation, creativity, and entrepreneurship are realigning in the same urban centers that traditionally fostered them. |
| Keywords: | Venture capital; investments; start-ups; cities; suburbs |
| JEL: | G20 O31 R00 |
| Date: | 2014–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0377&r=ino |
| By: | Esteves, Luiz A. |
| Abstract: | Economic literature describes drastic and non-drastic innovations as sources of marginal cost reduction. The difference is that non-drastic innovations are unable to reduce the new marginal cost in order to ensure that the innovator is able to set monopoly price lower than the previous marginal cost. So while protected by a patent, the innovator monopolist will not have incentives to reduce its price. At the end of the patent protection period, it is possible a market movement in direction of lower prices and higher quantities. However, this welfare gain is achieved only with the entry of a large number of competitors, which in turn depends on the efficiency of the diffusion of new technology. Failures of technological diffusion can stimulate anticompetitive behaviour, eliminating the gains to society. The antitrust policy can mitigate these risks and strengthen the role of technological diffusion of the patents. |
| Keywords: | Innovations; Patents; Technological Diffusion; Antitrust |
| JEL: | L4 O30 O31 O33 |
| Date: | 2014–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58285&r=ino |
| By: | Dominique Foray (College of Management, EPFL, 1015 Lausanne, Switzerland); Julio Raffo (World Intellectual Property Organization, Economics and Statistics Division, Geneva, Switzerland) |
| Abstract: | The paper addresses two issues. One concerns the general conditions and procedures involved in the emergence of a tool industry. Tool industries emerge and evolve as a collection of capital goods and tool inventors and manufacturers. One of our goals is to use some of the works on historical cases to build a heuristic framework concerning the main conditions for the emergence and development of tool industries. The other issue is more factual and involves the question whether a tool industry is today emerging in the area of education. The paper describes the emergence of a population of firms specialised in developing and commercialising educational tools and instructional technologies and discusses whether this trend can be seen as part of the solution to the innovation deficit and cost disease problems in this sector? |
| Keywords: | tool industry, educational tool, innovation in education |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:wip:wpaper:19&r=ino |
| By: | Alberdi Pons , Xabier (Deusto Business School (DBS), Universidad de Deusto); Gibaja Martíns, Juan José (Deusto Business School (DBS), Universidad de Deusto); Parrilli, Mario Davide (Deusto Business School (DBS), Universidad de Deusto and DBS and Orkestra-Basque Institute of Competitiveness) |
| Abstract: | Interaction is a central feature of well-functioning and integrated Regional Innovation Systems. However, it does not necessarily occur in an automatic fashion, denoting the existence of various system problems that may block learning and other crucial innovation processes. “Intermediaries” are organizations that encompass an increasing role in overcoming these problems. Still, they have not been adequately framed and assessed. The paper meets this need and presents a number of developments. First, we identify and categorize intermediaries according to some specific Innovation System problems they tap into, while we also include them in a novel intermediary component. Second, we operationalize sets of quantitative variables that permit new preliminary assessments. This methodology also permits new empirical insights that help framing more specific policy tools. The empirical analysis roots on an ad hoc data exploitation stemming from various surveys conducted by the Spanish Official Statistical Institute (INE) and the Spanish Venture Capital Association (ASCRI). We conduct multivariate techniques such as Multiple Factor and Cluster Analysis. The methodology creates a new typology that sorts Spanish regions according to the presence -or absence- of intermediaries when dealing with system problems. We find dissimilar outputs across regions. The latter might demand that their intermediary components are provided with strategic recommendations in response to specific system requirements. |
| Keywords: | regions; innovation systems; system problems; intermediaries; Spain; multiple factor analysis |
| JEL: | O18 R15 R50 R58 |
| Date: | 2014–10–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2014_020&r=ino |
| By: | Chu, Angus C.; Cozzi, Guido; Furukawa, Yuichi |
| Abstract: | This study explores the macroeconomics effects of labor unions in a two-country model of directed technical change in which the market size of each country determines the incentives for innovation. We find that an increase in the bargaining power of a wage-oriented union leads to a decrease in employment in the domestic economy. This result has two important implications on innovation. First, it reduces the rates of innovation and economic growth. Second, it causes innovation to be directed to the foreign economy, which in turn causes a negative effect on domestic wages relative to foreign wages in the long run. We also calibrate our model to data in the US and the UK. We find that the degree of unions' wage preference must be stronger in the UK than in the US in order for the calibrated economies to replicate the simultaneous decrease in labor income share and unemployment in the two countries. We also explore the quantitative implications of labor unions on social welfare and relative wage across countries. In summary, our calibrated model is able to explain about half of the decrease in relative wage between the US and the UK from 1980 to 2007. |
| Keywords: | economic growth, R&D, labor unions, income inequality |
| JEL: | E24 J51 O30 O43 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58886&r=ino |
| By: | Larson, Greg (Harvard University); Ajak, Peter Biar (University of Cambridge and Center for Strategic Analyses and Research); Pritchett, Lant (Harvard University and Center for Global Development) |
| Abstract: | The prevailing aid orthodoxy works well enough in stable environments, but is ill-equipped to navigate contexts of volatility and fragility. The orthodox approach is adept at solving straightforward technical or logistical problems (paving roads, building schools, immunizing children), but often struggles or outright fails when faced with complex, adaptive challenges (fighting corruption, upholding the rule of law, establishing democratic institutions). South Sudan, the world's newest country, presents a post-conflict environment full of complex, adaptive challenges. Prior to the signing of the Comprehensive Peace Agreement (CPA) in 2005 South Sudan had no formal institutions of self-governance. During the CPA period and after independence in 2011, foreign development agencies have contributed billions of dollars of aid and technical assistance to "build capacity" in the nascent Government of South Sudan (GoSS). The donors utilized approaches and mechanisms of support that at least nominally reflect the prevailing aid orthodoxy. We argue that orthodox state building and capacity building more or less failed in South Sudan, leaving the world's newest country mired in a "capability trap" (Andrews et al 2012). Despite countless trainings, workshops, reforms, and a large corps of foreign technical assistants embedded within state ministries, there is an absence of real change, and GoSS now "looks like a state" but performs as anything but. The challenges presented by this new, complicated, post-conflict country demand innovative approaches to building state capability which go beyond importing "best practice" solutions while feigning "client ownership." We explore one such approach to disruptive innovation that has emerged: Problem Driven Iterative Adaptation (PDIA). To escape from the world's newest capability trap, South Sudan's government and its international donors must challenge themselves to imagine innovative paths to state building, which diverge from "business as usual" and attempt to create something that lasts. |
| JEL: | H40 K40 L30 O20 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp13-041&r=ino |