nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2015‒10‒04
nine papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Internalizing Global Value Chains: A Firm-Level Analysis By Laura Alfaro; Pol Antràs; Davin Chor; Paola Conconi
  2. Measuring smile curves in global value chains By Ye, Ming; Meng, Bo; Wei, Shang-jin
  3. Global Value Chains in Africa By Foster-McGregor N.; Kaulich F.; Stehrer R.
  4. Production fragmentation, upstreamness, and value-added : evidence from factory Asia 1990-2005 By Ito, Tadashi; Vezina, Pierre-Louis
  5. Where does the surplus go? Disentangling the capital-labor distributive conflict By Francesco Bogliacino; Dario Guarascio; Valeria Cirillo
  6. Invention and diffusion of water supply and water efficiency technologies: insights from a global patent datase By Declan Conway; Antoine Dechezleprêtre; Nick Johnstone; Ivan HaÅ¡ÄiÄ
  7. Liquidity, Innovation, and Endogenous Growth By Malamud, Semyon; Zucchi, Francesca
  8. The Geography of Unconventional Innovation By Ruben Gaetani; Enrico Berkes
  9. Skill-Biased Structural Change and the Skill Premium By Richard Rogerson; Joseph Kaboski; Francisco Buera

  1. By: Laura Alfaro; Pol Antràs; Davin Chor; Paola Conconi
    Abstract: In recent decades, technological progress in information and communication technology and falling trade barriers have led firms to retain within their boundaries and in their domestic economies only a subset of their production stages. A key decision facing firms worldwide is the extent of control to exert over the different segments of their production processes. Building on Antràs and Chor (2013), we describe a property-rights model of firm boundary choices along the value chain. To assess the evidence, we construct firm-level measures of the upstreamness of integrated and non-integrated inputs by combining information on the production activities of firms operating in more than 100 countries with Input-Output tables. In line with the model's predictions, we find that whether a firm integrates upstream or downstream suppliers depends crucially on the elasticity of demand for its final product. Moreover, a firm's propensity to integrate a given stage of the value chain is shaped by the relative contractibility of the stages located upstream versus downstream from that stage. Our results suggest that contractual frictions play an important role in shaping the integration choices of firms around the world.
    JEL: D23 F14 F23 L20
    Date: 2015–09
  2. By: Ye, Ming; Meng, Bo; Wei, Shang-jin
    Abstract: The concept and logic of the "smile curve" in the context of global value chains has been widely used and discussed at the individual firm level, but rarely identified and investigated at the country and industry levels by using real data. This paper proposes an idea, based on an inter-country input-output model, to consistently measure both the strength and length of linkages between producers and consumers along global value chains. This idea allows for better identification and mapping of smile curves for countries and industries according to their positions and degrees of participation in a given conceptual value chain. Using the 1995-2011 World Input-Output Tables, several conceptual value chains are investigated, including exports of electrical and optical equipment from China and Mexico and exports of automobiles from Japan and Germany. The identified smile curves provide a very intuitive and visual image, which can significantly improve our understanding of the roles played by different countries and industries in global value chains. Further, the smile curves help identify the benefits gained by these countries and industries through their participation in global trade.
    Keywords: International trade, Exports, Globalization, Smile curve, Global value chains, APL, Fragmentation of production
    JEL: D57 F13 F15
    Date: 2015–08
  3. By: Foster-McGregor N.; Kaulich F.; Stehrer R. (UNU-MERIT)
    Abstract: This paper provides evidence on the extent of Global Value Chain GVC participation by Africa as a region and for individual African countries. We find that Africa as a whole is heavily involved in GVCs, being more engaged in GVCs than many developing country regions as well as developed countries such as the USA. This overall finding hides the fact that much of Africas participation in GVCs is in upstream production, with African firms providing primary inputs to firms in countries further down the value chain. The possibility of upgrading within GVCs in Africa is likely to be limited therefore, something which the current analysis suggests. Despite this, we observe a great deal of heterogeneity in terms of GVC participation and upgrading across African countries, with a number of African countries participating in GVCs to a relatively large extent.
    Keywords: Economic Integration; Multinational Firms; International Business;
    JEL: F15 F23
    Date: 2015
  4. By: Ito, Tadashi; Vezina, Pierre-Louis
    Abstract: We exploit the recent release of the 2005 Asian Input-Output Matrix to dress a picture of the geographic fragmentation of value added in Factory Asia from 1990 to 2005. We document 3 stylized facts. The first is that the average share of foreign value added embedded in production rose by about 7 percentage points between 1990 and 2005, from 9% to 16%. The second is that, contrary to popular belief, China's production embeds a smaller share of foreign value added than other Factory Asia countries'. Between 1990 and 2005 among Factory Asia countries China grew most after Japan as a source of value added to other countries' production. Third, country-industries at the upstream and downstream extremities of the supply chain embed a smaller share of foreign value added than those with intermediate levels of upstreamness.
    Keywords: Asia, China, International economic relations, International trade, Industry, Factory Asia, Supply chains, Upstreamness
    JEL: F13 F15
    Date: 2015–08
  5. By: Francesco Bogliacino; Dario Guarascio; Valeria Cirillo
    Abstract: The evidence on growing inequality in OECD countries has raised an important debate over its main drivers, pointing out an increasing importance of the capital-labour conflict. In this contribution, we aim at disentangling the role of some of the forces shaping this process. Our identification strategy relies on the sequential nature of wage setting and profits realization, in line with theoretical insights from the range theory of wages (postulating rents sharing at the shop floor level) and the principle of effective demand. In particular we focus on the role of technology and offshoring as instruments to create surplus and to shape the bargaining power of the parties involved in wage setting, and on different sources of demand as heterogeneous determinants of profits realization. The empirical analysis is performed on a panel of 38 manufacturing and service sectors over four time periods from 1995 to 2010, covering Germany, France, Italy, Spain, and United Kingdom. The contrasting effects of R&D and offshoring emerge as determinants of wages. Investment and internal demands are key variables in the realization of profits. When we look at the heterogeneity of the effects we see three main stylized facts. First of all, distinguishing for technological domain using Pavitt classes we can see that rents are effectively related with upgraded industries. Secondly, when we distinguish for the degree of openness we can see that, again, rents are mainly shared in open industries. Finally, when we disentangle the effect on wages per skill level, it is possible to confirm the intuition that offshoring hits the medium-low skill categories.
    Keywords: rent; surplus; distribution; inequality; offshoring; R&D
    Date: 2015–09–28
  6. By: Declan Conway; Antoine Dechezleprêtre; Nick Johnstone; Ivan HaÅ¡ÄiÄ
    Abstract: This paper identifies over 50 000 patents filed worldwide in various water-related technologies between 1990 and 2010, distinguishing between those related to availability (supply) and conservation (demand) technologies. Patenting activity is analysed – including inventive activity by country and technology, international diffusion of such water-related technologies, and international collaboration in technology development. Three results stand out from our analysis. First, although inventive activity in water-related technologies has been increasing over the last two decades, this growth has been disproportionately concentrated on supply-side technologies. Second, whilst 80% of water-related invention worldwide occurs in countries with low or moderate water scarcity, several countries with absolute or chronic water scarcity are relatively specialized in water efficiency technologies. Finally, although we observe a positive correlation between water scarcity and local filings of water patents, some countries with high water availability, in particular Switzerland or Norway, nevertheless appear as significant markets for water-efficiency technologies. This suggests that drivers other than local demand, like regulation and social and cultural factors, play a role in explaining the global flows of technologies. And finally, the extent to which innovation is “internationalised†shows some distinct patterns relative to those observed for innovation in technologies in general.
    Date: 2015–05
  7. By: Malamud, Semyon; Zucchi, Francesca
    Abstract: We study optimal liquidity management, innovation, and production decisions for a continuum of firms facing financing frictions and the threat of creative destruction. We show that liquidity constraints unambiguously lead firms to decrease their production rate but, surprisingly, may spur investment in innovation (R&D). Using the model, we characterize which firms substitute production for innovation when constrained and thus display a non-monotonic relation between cash reserves and R&D. We embed our single-firm dynamics in a Schumpeterian model of endogenous growth and demonstrate that financing frictions have an ambiguous effect on economic growth.
    Keywords: Cash management; Creative destruction; Endogenous growth; Financial constraints; Innovation
    JEL: D21 G31 G32 G35 L11
    Date: 2015–09
  8. By: Ruben Gaetani (Northwestern University); Enrico Berkes (Northwestern University)
    Abstract: Using a newly assembled dataset of narrowly georeferenced patents, we document that innovation activity is not as concentrated in densely populated areas as commonly believed: suburban regions are responsible for a substantial share of the innovation produced. Nevertheless, high-density areas disproportionately generate innovation of unconventional nature. We provide causal evidence for a mechanism that can generate this pattern: unconventional ideas are more likely to emerge when people interact in a dense and technologically diverse environment. An endogenous growth model with heterogeneous innovation and spatial sorting reveals that optimal place-based policy in the U.S. would foster urbanization to promote unconventional ideas, at the cost of sacrificing growth and inducing higher congestion.
    Date: 2015
  9. By: Richard Rogerson (Princeton University); Joseph Kaboski (University of Notre Dame); Francisco Buera (Federal Reserve Bank of Chicago)
    Abstract: We document for a broad panel of advanced economies that increases in GDP per capita are associated with a shift in the composition of value added to sectors that are intensive in high-skill labor. It follows that further development in these economies leads to an increase in the relative demand for skilled labor. We develop a two-sector model of this process and use it to assess the contribution of this process of skill-biased structural change to the rise of the skill premium in the US over the period 1977 to 2005. We find that these compositional demands account for roughly 30% of the overall increase of the skill premium due to technical change.
    Date: 2015

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