nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2016‒10‒02
seven papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. R&D and Productivity in the US and the EU: Sectoral Specificities and Differences in the Crisis By Davide Castellani; Mariacristina Piva; Torben Schubert; Marco Vivarelli
  2. Market Regulations, Prices, and Productivity By Gilbert Cette; Jimmy Lopez; Jacques Mairesse
  3. Corporate tax asymmetries and R&D: Evidence from a tax reform for business groups in Japan By Masanori Orihara
  4. The Effect of Innovation Box Regimes on Income Shifting and Real Activity By Chen, Shannon; De Simone, Lisa; Hanlon, Michelle; Lester, Rebecca
  5. Intangible Investment and Firm Performance By Nathan Chappell; Suzi Kerr
  6. Downskilling: Changes in Employer Skill Requirements over the Business Cycle By Sasser Modestino, Alicia; Shoag, Daniel; Ballance, Joshua
  7. Mapping digital businesses with big data: some early findings from the UK By Max Nathan; Anna Rosso

  1. By: Davide Castellani (Henley Business School, University of Reading); Mariacristina Piva; Torben Schubert; Marco Vivarelli
    Abstract: Using data on the US and EU top R&D spenders from 2004 until 2012, this paper investigates the sources of the US/EU productivity gap. We find robust evidence that US firms have a higher capacity to translate R&D into productivity gains (especially in the high-tech industries), and this contributes to explaining the higher productivity of US firms. Conversely, EU firms are more likely to achieve productivity gains through capital-embodied technological change at least in medium and low-tech sectors. Our results also show that the US/EU productivity gap has worsened during the crisis period, as the EU companies have been more affected by the economic crisis in their capacity to translate R&D investments into productivity. Based on these findings, we make a case for a learning-based and selective R&D funding, which – instead of purely aiming at stimulating higher R&D expenditures – works on improving the firms’ capabilities to transform R&D into productivity gains.
    Keywords: R&D, productivity, economic crisis, US, EU
    JEL: O33 O51 O52
    Date: 2016–06
  2. By: Gilbert Cette (Centre de recherche de la Banque de France - Banque de France); Jimmy Lopez (LEDi - Laboratoire d'Economie de Dijon - UB - Université de Bourgogne - CNRS - Centre National de la Recherche Scientifique, Centre de recherche de la Banque de France - Banque de France); Jacques Mairesse (CREST-ENSAE - Centre de Recherche en Économie et STatistique (CREST), UNU-MERIT - UNU-MERIT - United Nations University - Maastricht University, Centre de recherche de la Banque de France - Banque de France)
    Abstract: This study is, to our knowledge, the first attempt to infer the consequences on productivity entailed by anticompetitive regulations in product and labor markets through their impacts on production prices and wages. Results show that changes in production prices and wages at country*industry levels are informative about the creation of rents impeding productivity in different ways and to different extents. A simulation based on OECD regulation indicators suggests that nearly all countries could expect sizeable gains in multifactor productivity from the implementation of large structural reform programs changing anticompetitive regulation practices on product and labor markets.
    Keywords: rents, anti-competitive regulations,Productivity, market imperfections
    Date: 2016
  3. By: Masanori Orihara (Policy Research Institute, Ministry of Finance,Japan)
    Abstract: Economic theory dating back to Domar and Musgrave (1944, Quarterly Journal of Economics 58, 388-422) suggests that the tax treatment of gains and losses can affect incentives for firms to undertake high-risk investments. We take advantage of a 2002 tax reform in Japan as a natural experiment to test the theory. This tax reform introduced a consolidated taxation system (CTS). The CTS allows business groups to offset gains with losses across firms in their group. Thus, the CTS can mitigate disincentives to high-risk investments. Using information on R&D as the investment risk measures, we estimate dynamic investment models with unique panel data of Japanese firms between 1994 and 2012. For identification, we take an instrumental variable approach in a difference-in-differences framework or in a triple-differences framework. We provide evidence that the CTS increases R&D, in agreement with Domar and Musgrave (1944). We also find evidence that the CTS enhances risk-sharing across group members and across asset types. These findings suggest that mitigating tax asymmetries is an effective policy to help encourage both risk-taking and risk-sharing.
    Keywords: tax asymmetries, R&D, business group, risk-taking, risk-sharing, natural experiment
    JEL: G31 G38 H25 H32
  4. By: Chen, Shannon (University of TX); De Simone, Lisa (Stanford University); Hanlon, Michelle (MIT); Lester, Rebecca (Stanford University)
    Abstract: We study whether innovation box tax incentives, which reduce tax rates on innovation-related income, are associated with tax-motivated income shifting, investment, and employment in the countries that implement these regimes. Using a sample of European and U.S. multinationals' subsidiaries operating in Europe and three income shifting models, we find some evidence that firms shift less income out of relatively high statutory tax rate countries following the implementation of an innovation box. We also find that innovation box regimes successfully increase employment but do not result in significant increases in fixed asset investment. Our study contributes to the literature by evaluating multiple income shifting models and informing the ongoing policy debate regarding the economic effects of innovation box regimes.
    Date: 2016–07
  5. By: Nathan Chappell (Motu Economic and Public Policy Research); Suzi Kerr (Motu Economic and Public Policy Research)
    Abstract: We combine survey and administrative data for about 13,000 firms from 2005 to 2013 to study the inter-relationships among firm characteristics, intangible investment and firm performance. We find that firm size is associated with higher intangible investment, while firm age, very low competition (‘captive market’) and very high competition (‘many competitors, none dominant’) are associated with lower intangible investment. Relating intangible investment to subsequent firm performance, we find that higher investment is associated with higher labour and capital input and higher revenue, relative to what would otherwise have been predicted. We also find that higher investment is associated with higher firm-reported employee and customer satisfaction, but is not associated with higher productivity or profitability. While we cannot estimate a causal model, the evidence suggests that intangible investment is associated with firm strategies related to growth and possibly to ‘soft’ performance objectives, but not to productivity or profitability.
    Keywords: Intangible investment; productivity; firm performance; industrial policy
    JEL: D22 D24 L21
    Date: 2016–09
  6. By: Sasser Modestino, Alicia (Northeastern University); Shoag, Daniel (Harvard University); Ballance, Joshua (Federal Reserve Bank of Boston)
    Abstract: Using a novel database of 82.5 million online job postings, we show that employer skill requirements fell as the labor market improved from 2010-2014. We find that a 1 percentage point reduction in the local unemployment rate is associated with a roughly 0.27 percentage point reduction in the fraction of jobs requiring at least a bachelor's degree and a roughly 0.23 percentage point reduction in the fraction requiring 5 or more years of experience. This pattern is established using multiple measures of labor availability, is bolstered by similar trends along heretofore unmeasured dimensions of skill, and even occurs within firm-job title pairs. We further confirm the causal effect of labor market tightening on skill requirements using a natural experiment based on the fracking boom in the U.S. as an exogenous shock to local labor supply in tradable, non-fracking industries. These industries are not plausibly affected by local demand shocks or natural gas extraction technology, but still show fewer skill requirements in response to tighter labor markets. Our results imply this labor-market induced downskilling reversed much of the cyclical increase in education and experience requirements that occurred during the Great Recession.
    JEL: D22 E24 J23 J63
    Date: 2016–03
  7. By: Max Nathan; Anna Rosso
    Abstract: Governments around the world want to develop their ICT industries. Researchers and policymakers thus need a clear picture of digital businesses, but conventional datasets and typologies tend to lag real-world change. We use innovative ‘big data’ resources to perform an alternative analysis for all active companies in the UK, focusing on ICT-producing firms. Exploiting a combination of observed and modelled variables, we develop a novel ‘sector-product’ approach and use text mining to provide further detail on key sector-product cells. We find that the ICT production space is around 42% larger than SIC-based estimates, with around 70,000 more companies. We also find ICT employment shares over double the conventional estimates, although this result is more speculative. Our findings are robust to various scope, selection and sample construction challenges. We use our experiences to reflect on the broader pros and cons of frontier data use.
    Keywords: Big Data; Text mining; ICTs; Digital economy; Industrial policy; Firm-level analysis
    JEL: C81 L63 L86 O38
    Date: 2015

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