nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2017‒09‒17
ten papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. R&D Policy and Technological Trajectories of Regions: Evidence from the EU Framework Programmes By Wolf-Hendrik Uhlbach; Pierre-Alexandre Balland; Thomas Scherngell
  2. Knowledge Diffusion and Trade across Countries and Sectors By Nan Li; Jie Cai; Ana Maria Santacreu
  3. Network-Mediated Knowledge Spillovers: A Cross-Country Comparative Analysis of Information Security Innovations By Branstetter, Lee; Gandal, Neil; Kunievsky, Nadav
  4. Tax Evasion, Firm Dynamics and Growth By Emmanuele Bobbio
  5. Allocative efficiency of UK firms during the Great Recession By Florian Gerth
  6. European R&D networks: A snapshot from the 7th EU Framework Programme By Sara Amoroso; Alex Coad; Nicola Grassano
  7. Home Market Effects on Innovation By Thibault Fally; Ana Cecilia Fieler; Justin Caron
  8. Foreign Investment and Domestic Productivity: Identifying Knowledge Spillovers and Competition Effects By Christian Fons-Rosen; Sebnem Kalemli-Ozcan; Bent E. Sorensen; Carolina Villegas-Sanchez; Vadym (V.) Volosovych
  9. Towards a European R&D Incentive? An assessment of R&D Provisions under a Common Corporate Tax Base By Diego d’Andria; Dimitris Pontikakis; Agnieszka Skonieczna
  10. Labour flows across firm´s size, economic sectors and wages: evidence from employer-employee linked panel By Luz Adriana Flórez; Leonardo Morales Z; Daniel Medina; José Lobo C

  1. By: Wolf-Hendrik Uhlbach; Pierre-Alexandre Balland; Thomas Scherngell
    Abstract: It is widely acknowledged that new technological specializations of regions are to a large extent driven by the recombination of existing knowledge and capabilities. Since this process is path-dependant and self-reinforcing, it can easily lead to technological lock-ins. A key issue is therefore to evaluate whether public policy can impact technological trajectories of regions and how it can be more effective. To address this issue, we analyze quantitatively and systematically the relation between R&D subsidies and new technological specializations of European regions from 1999 to 2010. R&D subsidies are identified by using the EU Framework Pro- grammes (FP) from the EUPRO database, and matched with patent documents from the OECD-REGPAT database. Using a fixed-effects linear probability model, our results indicate that FP participations have a positive but relatively small effect on the development of new specializations of regions, and that it can compensate for a lack of local related capabilities. We also find evidence that R&D subsidies have the highest impact if the level of relatedness with the new technology is neither too low (policy can not build a cathedral in the desert) nor too high (if all the capabilities are already present there is no need for policy).
    Keywords: Regional Diversification, Technological Change, R&D subsidies, EU Framework Programmes
    JEL: O31 O33 O38 O52
    Date: 2017–09
  2. By: Nan Li (International Monetary Fund); Jie Cai (Shanghai University of Finance and Economics); Ana Maria Santacreu (St. Louis Fed)
    Abstract: Countries and sectors interact through knowledge spillovers and international trade flows. These interactions drive differences in income per capita and innovation not only across countries, but also across sectors within a country. We develop and quantify a model of innovation, knowledge diffusion and trade that can explain these differences. Using data on intersectoral patent citations, R&D expenditures and international trade flows, we calibrate the model and perform several counterfactual exercises. Decreases in trade costs or increases in the speed of diffusion reallocate resources across countries and sectors, generating a distributional effect on aggregate innovation and growth.
    Date: 2017
  3. By: Branstetter, Lee; Gandal, Neil; Kunievsky, Nadav
    Abstract: A large and growing literature has used patent and patent citation data to measure knowledge spillovers across inventions and organizations, but relatively few papers in this literature have explicitly considered the collaboration networks formed by inventors as a mechanism for shaping and transmitting these knowledge flows. This paper utilizes an approach developed by Fershtman and Gandal (FG 2011) (and applied to Open Source Software) to examine the incidence and nature of knowledge flows mediated by the collaboration networks of inventors active in the information security industry. This is an industry in which a number of nations outside the United States, including Israel, have emerged as important centers of innovation. Israeli prominence in this sector is often attributed, in part, to a dense network of personal collections and collaborations that has its genesis in elite intelligence units in the Israeli Defense Forces, through which many Israeli information security inventors and entrepreneurs receive their first exposure to this domain. Using data from U.S. PTO patent grants in information security, we find that the quality of Israeli information security inventions is systematically linked to the structure of the collaborative network generated by Israeli inventors in this sector. Using the FG (2011) model, this suggests that there are knowledge spillovers from the network. In some other nations, invention quality is less closely linked to the collaboration networks of inventors. This research highlights the importance of direct interaction among inventors as a conduit for flows of frontier scientific knowledge.
    Keywords: Information Security; Knowledge Spillovers; patents
    JEL: O31 O33 O57
    Date: 2017–09
  4. By: Emmanuele Bobbio (Bank of Italy)
    Abstract: Italy's growth performance has been lacklustre in the last two decades. The economy has low R&D intensity; firms are smaller and less likely to grow or exit than firms in other advanced countries; the shadow economy is large. I show how these features arise simultaneously in a Schumpeterian growth model with heterogeneous firms where the tax auditing probability increases with firm size. Tax evasion confers a cost advantage over competitors. In equilibrium, small firms invest less in innovation because growing entails a (shadow) cost of fiscal regularization. Unfair competition forces other firms to lower the mark-up they charge for their new products, reducing the incentive to innovate. Market selection is hampered, further lowering the aggregate growth rate along the extensive margin. I calibrate the model on Italian firm-level data for the period 1995-2006 and find that enforcing taxes would have increased the long-run growth rate from 0.9% to 1.1%. The market share of high type firms would have been 8 percentage points higher and average firm size 25% higher. Also, I find that lowering the tax burden can have a significant impact on growth when the shadow economy is large, while the effect is negligible when taxes are enforced.
    Date: 2017
  5. By: Florian Gerth
    Abstract: This paper argues that the fall and persistently low level of UK Total Factor Productivity (TFP) following the Great Recession was caused by the turnover (entry and exit) of firms, rather than by resource misallocation between firms within industries. I conduct a misallocation exercise employing the Hsieh and Klenow (2009) and the Olley and Pakes (1996) methods using the FAME microlevel dataset that contains more than 9 million firms within the UK over the 2006 - 2014 period. The main findings are that, first, service sector TFP drops far more than manufacturing TFP and therefore drives the fall and long-lasting depression in aggregate productivity. Second, within-industry misallocation cannot account for the drop in TFP. Third, the entry and exit of firms both contribute to the decline in aggregate TFP while the entry of firms has a larger negative effect on TFP than the exit of firms. And fourth, the pattern of within-industry misallocation and firm dynamics is the same for the manufacturing and the service sector.
    Keywords: Great Recession in the UK; Factor Misallocation; FAME dataset
    JEL: D24 E13 E32 L11
    Date: 2017–09
  6. By: Sara Amoroso (European Commission - JRC); Alex Coad (CENTRUM Católica Graduate Business School, Pontificia Universidad Católica del Perú, Lima, Perú); Nicola Grassano (European Commission – JRC)
    Abstract: Recent empirical studies have investigated the territorial impact of Europe’s research policies, in particular the contribution of the European Framework Programmes to the integration of a European Research Area. This paper deepens the analysis on the integration and participation of peripheral regions, by focusing on the differences in intensity and determinants of inter-regional collaborations across three groups of collaborations. We consider collaborations among more developed regions, between more and less developed regions, and among less developed regions. Building on the recent spatial interaction literature, this paper investigates the effects of physical, institutional, social and technological proximity on the intensity of inter-regional research collaboration across heterogeneous European regions. We find that the impact of disparities in human capital and technological proximity on regional R&D cooperation is relevant and differs across subgroups of collaborations. Moreover, despite the efforts of integrating marginal actors, peripheral regions have lower rates of collaborations.
    Keywords: European Research Area, spatial interaction modelling, R&D collaboration, regional integration
    JEL: O38 L14 F15 R15
    Date: 2017–07
  7. By: Thibault Fally (University of California Berkeley); Ana Cecilia Fieler (University of Pennsylvania); Justin Caron (HEC Montreal)
    Abstract: We model and estimate the home-market effect and study its implications for inequality within and across countries. The home-market effect occurs when exogenous differences in demand across countries generate endogenous differences in comparative advantages through technical change that is specific to a country and sector. Estimating it has proved difficult because econometricians do not directly observe exogenous differences in demand but only observe equilibrium expenditures, which also depend on supply-side characteristics. Our solution is to exploit non-homotheticity in preferences to construct instruments for the location of production, which determines comparative advantage through a home-market effect on innovation. Motivated by data, the model features factor-biased technologies and imperfect technology diffusion, which generate both Ricardian (endogenous relative productivity) and Heckscher-Ohlin-type comparative advantage (endogenous factor intensity). Because the production of income-elastic goods concentrates in rich, skill-endowed countries, technology diffusion implies that income-elastic goods in the model are endogenously more skill intensive in all countries. Home-market effects thus generate within-country inequalities through skill-biased technical change while they generate across-country inequalities because countries differ in their access to larger, richer markets. We explore counterfactual simulations using the estimated model to evaluate the effects of trade and technology diffusion on inequalities.
    Date: 2017
  8. By: Christian Fons-Rosen (Universitat Pompeu Fabra, CEPR, and Barcelona Graduate School of Economics, Spain); Sebnem Kalemli-Ozcan (University of Maryland, CEPR, and NBER, the USA); Bent E. Sorensen (University of Houston and CEPR, the USA); Carolina Villegas-Sanchez (ESADE - Universitat Ramon Llull, Spain); Vadym (V.) Volosovych (Erasmus University Rotterdam, Erasmus Research Institute of Management, the Netherlands; Tinbergen Institute, The Netherlands)
    Abstract: We study the impact of foreign direct investment (FDI) on total factor productivity (TFP) of domestic firms using a new, representative firm-level data set spanning six countries. A novel finding is that firm-level spillovers from foreign firms to domestic companies can be significantly positive, non-existent, or even negative, depending on which sectors receive FDI. When foreign firms produce in the same narrow sector as domestic firms, the latter are negatively affected by increasing competition and positively affected by knowledge spillovers. We find that the positive spillovers dominate if foreign firms enter sectors where firms are "technologically close,'' controlling for the endogeneity of their entry decision into such sectors. Positive technology spillovers also affect firms in other sectors, if those sectors are technologically close to the sectors receiving FDI. Increasing FDI in sectors that are technologically close to other sectors boosts TFP of domestic firms by twice as much as increasing FDI by the same amount across all sectors.
    Keywords: Multinationals; Competition; Technology; Selection; FDI; TFP
    JEL: E32 F15 F36 O16
    Date: 2017–09–05
  9. By: Diego d’Andria (European Commission – Joint Research Center); Dimitris Pontikakis (European Commission – Joint Research Center); Agnieszka Skonieczna (European Commission)
    Abstract: EU businesses underinvest in R&D which is a driver of economic growth and productivity. While the world is becoming more R&D-intensive, the relative weight of the EU is decreasing, mainly due to the rapid rise of China. Taxation has been increasingly used to stimulate investment in R&D. A recent proposal for a Common Consolidated Corporate Tax Base (CCCTB) across the European Union (EU) includes an R&D incentive. This paper presents the rationale for the inclusion of R&D provisions, quantifies the subsidy implied by alternative options using the user's cost approach and approximates aggregate impacts by means of simple extrapolations from elasticities found in literature. We find that the CCCTB without an R&D incentive would significantly deteriorate incentives to invest in R&D. We present alternative options and argue that the level of support should be ambitious to address the pressing need in the EU to invest more, stay globally competitive and reach the EU's target of investing 3% of its GDP in R&D. Importantly, to take full advantage of the opportunities offered by this tax reform, EU member states will have to coherently mobilise a range of policies and engage in complementary non-tax interventions in their national innovation systems. We conclude with a broad consideration of what these may be for the varied and variably developed business innovation capabilities found across the EU.
    Keywords: Corporate taxation, R&D, innovation, CCCTB, R&D tax incentives
    JEL: F21 H25 H73 O31
    Date: 2017–07
  10. By: Luz Adriana Flórez (Banco de la República de Colombia); Leonardo Morales Z (Banco de la República de Colombia); Daniel Medina; José Lobo C (Universidad Nacional de Colombia)
    Abstract: This paper explores the behavior of Colombia labour market flows. We focus on job creation and job destruction from the plant´s perspective, and on hiring and separations from the worker´s point of view. We show how these labour flows change across different dimensions such as, firm’s size, economic sectors, as well as wages and present the dynamic of tenure across these dimensions. Our results are in line with those of Birch (1981) and more recently Neumark et al. (2008), who found that small firms are the ones who created jobs in the economy. We found that small firms have higher job and worker reallocation rates; and firms especially those with less than 50 employees, are the ones with a higher employment growth rates compared to the larger ones. Moreover, we found that construction presents the highest labour flows, while manufacture the lowest. Finally, we found a negative relation between firm´s average wages and labour flows. Classification JEL: E24, J63, M50
    Keywords: Job creation, Job destruction, Hiring, Separations, Firm´s size, Churning, Wages, Tenure.
    Date: 2017–09

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