nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2017‒11‒19
twelve papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Knowledge Spillovers from clean and dirty technologies By Antoine Dechezlepretre, Ralf Martin, Myra Mohnen
  2. Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China By Tasso Adamopoulos; Loren Brandt; Jessica Leight; Diego Restuccia
  3. The Product-Related Environmental Regulation, Innovation, and Competitiveness: Empirical Evidence from Malaysian and Vietnamese Firms By Qizhong YANG; Tsunehiro OTSUKI
  4. The Effect of Restructuring on Labor Reallocation and Productivity Growth: An Estimation for Korea By Choi, Hyelin; Jung, Sung Chun; Kim, Su Bin
  5. Female owners versus female managers: Who is better at introducing innovations? By Dohse, Dirk; Goel, Rajeev K.; Nelson, Michael A.
  6. Multinationals and Reallocation: Productivity Growth in the Canadian Manufacturing Sector By Gu, Wulong; Li, Jiang
  7. Tax incentives for research and development and their use in tax planning By Pfeiffer, Olena; Spengel, Christoph
  8. Where to get the best bang for the buck in the United Kingdom?: Industrial strategy, investment and lagging regions By Rafał Kierzenkowski; Peter Gal; Gabor Fulop
  9. Interest rates, R&D investment and the distortionary effects of R&D incentives By Uluc Aysun; Zeynep Kabukcuoglu
  10. Structural Change and Productivity Growth in India and the People’s Republic of China By Mallick, Jagannath
  11. Wages, Human Capital, and Structural Transformation By Berthold Herrendorf; Todd Schoellman
  12. Energy transition in Germany and regional spillovers: What triggers the diffusion of renewable energy in firms? By Horbach, Jens; Rammer, Christian

  1. By: Antoine Dechezlepretre, Ralf Martin, Myra Mohnen
    Abstract: Government policy in support of innovation often varies across technology areas. An important example are climate change policies that typically try to support so called clean technologies that avoid greenhouse gas pollution and hamper dirty technologies that are associated with polluting emissions. This paper explores the economic consequences of such policy moves in the short run. At the margin private returns of R&D investments in different areas should be equalised. Hence, shifting the composition of R&D activities by a policy intervention will only have a meaningful impact on economic outcomes if the external returns differ. Hence, we compare innovation spillovers between clean, dirty and other emerging technologies using patent citation data. We develop new methodology including the usage of Page rank measures developed by Google to rank web content. Exploring a wide range of robustness checks we consistently find up to 40% higher levels of spillovers from clean technologies. We also use firm-level financial data to investigate the impact of knowledge spillovers on firms’ market value and find that marginal economic value of spillovers from clean technologies is also greater.
    Date: 2017–10
  2. By: Tasso Adamopoulos; Loren Brandt; Jessica Leight; Diego Restuccia
    Abstract: We use household-level panel data from China and a quantitative framework to document the extent and consequences of factor misallocation in agriculture. We find that there are substantial frictions in both the land and capital markets linked to land institutions in rural China that disproportionately constrain the more productive farmers. These frictions reduce aggregate agricultural productivity in China by affecting two key margins: (1) the allocation of resources across farmers (misallocation) and (2) the allocation of workers across sectors, in particular the type of farmers who operate in agriculture (selection). We show that selection can substantially amplify the static misallocation effect of distortionary policies by affecting occupational choices that worsen the distribution of productive units in agriculture.
    Keywords: Agriculture, misallocation, selection, productivity, China.
    JEL: O11 O14 O4 E02 Q1
    Date: 2017–11–13
  3. By: Qizhong YANG (The Graduate School of Economics, Osaka University); Tsunehiro OTSUKI (Osaka School of International Public Policy, Osaka University)
    Abstract: This study examined the impact of two PRERs released by the EU—RoHS and REACH—on Malaysian and Vietnamese firms’ compliance. The analysis considers productivity as a realization of innovations and examines the R&D enhancement effect of PRERs. The effect of PRERs on productivity is also broken down into direct and indirect effects through R&D enhancement. The result shows that the response to REACH can create incentives to advance R&D, and productivity can increase through both direct and indirect channels. No relationship between the response to RoHS and R&D expenditure is found. Further analysis shows that firms comply with RoHS and REACH in different ways, but just the ability to continue exporting to the EU motivates compliance.
    Keywords: RoHS, REACH, Innovation, Productivity, Porter Hypothesis
    JEL: F18 O31 Q55 Q56
    Date: 2017–11
  4. By: Choi, Hyelin (Korea Institute for International Economic Policy); Jung, Sung Chun (Korea Institute for International Economic Policy); Kim, Su Bin (Korea Institute for International Economic Policy)
    Abstract: Productivity is considered one of the most important factors for economic growth. Total productivity grows through technological progress or reallocation of resources. This paper analyses their contribution to economic growth for total economy and by sectors. The main finding is that economy-wide increases but this is mainly due to internal technological improvements. On the one hand, inter-sector reallocation of labor negatively contributes to economic growth as employment moves to service sectors with low productivity. Further, when looking at the sectoral-level productivity growth, both internal and external restructuring make positive contributions to aggregate economic growth. However, internal technological progress and reallocation of employment appear to similarly contribute to the sectoral-level economic growth in the manufacturing sector, whereas internal restructuring makes a larger contribution to economic growth in the service sector. This suggests that there is more room for reallocation of resources to contribute to the productivity growth in service sectors. Therefore, the productivity growth of the service sector would foster economy-wide productivity and it can be achieved by the mitigation of misallocation of resources in service sectors.
    Keywords: Productivity; Employment; Labor reallocation
    JEL: E01 E20 E22 E23 E24
    Date: 2017–09–15
  5. By: Dohse, Dirk; Goel, Rajeev K.; Nelson, Michael A.
    Abstract: This paper uses firm-level survey responses across more than 100 emerging and developing countries to examine whether female managers or female owners of firms were better at bringing innovations to the market. Employing a range of firm-specific and country-specific controls, the econometric results show that female owners of firms, rather than female managers, were more likely to introduce innovations. As expected, innovations resulted from firms engaging in R&D. Larger and older firms reinforced these tendencies; however, sole proprietorships had the opposite effect. The presence of an informal sector and finance availability constraints actually spurred innovation. Finally, the economy-wide effects of greater economic freedom and stronger patent protections were positive, while greater economic prosperity somewhat led to complacency.
    Keywords: innovation,female,owners,managers,patent protection,R&D,firm size,sole proprietorship
    JEL: O32 O33 O57 J16
    Date: 2017
  6. By: Gu, Wulong; Li, Jiang
    Abstract: Output growth in Canadian manufacturing was slower in the 2000s than in the 1990s. The sector?s real output declined, in contrast to an overall increase in output in the business sector (Clarke and Couture 2017). It fell rapidly during the 2007-to-2009 financial crisis, and returned to its pre-crisis level only in 2016. The market share of foreign-controlled firms also declined after 2000 (Baldwin and Li 2017). This paper examines the role of multinationals and reallocation in productivity growth in the Canadian manufacturing sector for the period from 2001 to 2010, a period of significant change in this sector. It contributes to the literature on several fronts. First, it complements the literature by examining productivity growth at the firm level. This paper also seeks to examine whether the decline that started around 2006 was associated with changes in the effect of reallocation and the role of foreign multinationals in aggregate productivity growth.
    Keywords: Economic accounts, Manufacturing, Productivity accounts
    Date: 2017–10–30
  7. By: Pfeiffer, Olena; Spengel, Christoph
    Abstract: This study provides a comprehensive analysis of various aspects of R&D tax incentives. It explains the economic justification behind the state support of research and development and summarizes its main types. In addition, it gives an overview of the existing R&D tax incentives in Europe and provides a thorough review of the empirical literature on the outcomes of fiscal incentives. Furthermore, the Devereux and Griffith model is used to determine the effective tax burden of multinational firms that reside in countries which implement R&D tax support and countries which do not. The model is developed further following Spengel and Elschner (2010) and Evers et al. (2015) to reflect a potential use of R&D tax incentives by multinational firms for tax planning. The hypothesis developed in the model is tested in an empirical estimation, where we employ the OECD data on international co-operation in patents. According to our main findings, there are at least two reasons why input-oriented R&D tax incentives, such as tax credits and tax super-deductions, constitute a more suitable instrument for fostering research and development than the output-oriented incentives, such as IP Boxes. First, there is robust evidence found in the empirical literature which shows the positive effect introducing input-oriented tax incentives has on a firm's innovative activity, whereas studies on output-oriented tax incentives are not able to support this argument. Secondly, according to our theoretical and empirical analyses, output-oriented R&D tax incentives may be used by multinationals for tax planning as opposed to their intended use of fostering research and development.
    Keywords: research and development,R&D,tax planning,corporate taxation
    JEL: H25 F23 H26 H3
    Date: 2017
  8. By: Rafał Kierzenkowski (OECD); Peter Gal (OECD); Gabor Fulop (OECD)
    Abstract: The United Kingdom is preparing a modern industrial strategy to boost labour productivity across the whole country and to narrow regional gaps in living standards. This raises the question of the optimal allocation of scarce resources in meeting these targets. This study identifies industrial strengths of each region and scope to boost regional productivity through the channel of higher capital intensity. Overall regional investment ratios appear weakly linked to regional productivity, but the sectoral composition of regions and their type of investment are more important determinants. Each region has productivity leaders, but the concentration of such firms is the highest in the south of England. Differences in the representation of the most productive firms in regions are strongly related to differences in regional productivity. The empirical methodology quantifies the productivity effects of raising the capital intensity in each sector-region, focusing on viable firms falling behind the national productivity frontier in all but the finance and insurance sectors over 1995-2014. To enhance labour productivity of lagging regions, the industrial strategy should promote the catch up of firms with the national best performers in services sectors, in particular knowledge intensive services such as ICT and business services, but also wholesale and retail trade. This finding is consistent with the UK’s leading global position in high value-added services sectors. The type of investment matters: boosting research and development in the manufacturing sector in some lagging regions would also be effective in stimulating productivity. Manufacturing investment cannot be a substitute to investment in services given the small size of the manufacturing sector and its high exposure to competition from rapidly emerging global hubs. However, this study does not quantify the effects of skills, the benefits of greater industrial diversification and the positive impact that larger cities would have on agglomeration effects.
    Keywords: capital intensity, firms, industrial policy, industry, investment, productivity, R&D, regions, sectors, United Kingdom
    JEL: L52 O14 O18 O25
    Date: 2017–11–06
  9. By: Uluc Aysun (Department of Economics, College of Business Administration, University of Central Florida); Zeynep Kabukcuoglu (Department of Economics, Villanova School of Business, Villanova University)
    Abstract: This paper conducts the first analysis of how interest rates are related to firms' allocation of investment between R&D and non-R&D activities and how R&D incentives alter this relationship. It theoretically predicts that if firms receive incentives mostly in the form of grants and subsidies that reduce their dependence on external finance, their share of R&D spending increases (decreases) during a credit tightening (easing). Conversely, if tax credits are the primary incentive, rms' decrease (increase) their share of R&D spending during a credit tightening (easing). The paper demonstrates empirical support for these predictions by using rm-level financial and sector-level R&D incentives data and a unique methodology that focuses on the within firm allocation of investment.
    Keywords: R&D, finance, grants, tax credits, COMPUSTAT
    JEL: D22 G31 G32 O31 O38
    Date: 2017–11
  10. By: Mallick, Jagannath (Asian Development Bank Institute)
    Abstract: Globalization has significantly changed the composition and structure of emerging economies, which has in turn reallocated factors across various economic activities. In this context, we examine the sources of labor reallocation or structural change, and measures and empirically evaluates the contribution of structural change to labor productivity growth (LPG) by controlling for indicators of economic globalization and types of human capital. We also evaluate the relative contributions of human and physical capital to LPG. We found that changing final demand is the most crucial factor in labor reallocation in India. In the PRC, this and changes in technology are factors of labor allocation. The regression analysis confirmed that structural change, globalization, and human capital significantly contribute to LPG. Due to its prevailing structure, India is capable of leading global economic growth in the future, provided that certain necessary policies on human capital development, outward-oriented policies, and other conducive economic reform measures are taken.
    Keywords: FDI; Trade; structural change; productivity growth; emerging economy
    JEL: F10 J20 O40
    Date: 2017–02–02
  11. By: Berthold Herrendorf; Todd Schoellman
    Abstract: Average wages are considerably lower in agriculture than in the other sectors. We document this fact for thirteen countries ranging from rich (Canada, U.S.) to poor (India, Indonesia). We develop a measure of human capital that accounts for the selection of workers with different unobserved skills into sectors. We find that differences in human capital account for most of the wage gaps. We develop a model that rationalizes this finding and that allows us to quantify the distortions to the allocation of labor. We find that they are considerably smaller than typically claimed in the literature.
    Keywords: human capital gaps, misallocation of labor, wage gaps
    JEL: O10
    Date: 2017
  12. By: Horbach, Jens; Rammer, Christian
    Abstract: The success of an energy turnaround towards renewables highly depends on the willingness and ability of firms to adopt energy technologies using renewable sources. Existing studies focused on the role of regulation and energy markets (e.g. the price for fossil energy) to explain the diffusion of green energy technologies. The present paper tries to give a more comprehensive view on the determinants of renewable energy innovations focusing on the crucial role of firms' regional environment (role of regional spillover effects, the greenness of a region and the regional endowment with green energy plants). We use a unique database combining the Community Innovation Survey 2014 for Germany and NUTS 3 data on renewable energy plants, the greenness of a region and other economic control variables. We find that geographical proximity to electricity production based on renewable energy sources and the orientation of a region towards 'green issues' (measured by the share of green party voters) are both major drivers for such innovations. Furthermore, our results show that in addition to regulation, government subsidies for eco-innovation, high energy costs and regional knowledge spillovers contribute to a rapid adoption of renewable energy. The reinforcing nature of this process leads to a diverging regional development of renewable energy innovations.
    Keywords: Eco-Innovation,Renewable Energy,Community Innovation Survey
    JEL: C25 O31 Q20 R11
    Date: 2017

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