nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2017‒12‒18
eleven papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Endogenous growth and global divergence in a multi-country agent-based model By Giovanni Dosi; Andrea Roventini; Emanuele Russo
  3. The impact of multinational R&D spending firms on job polarization and mobility By Jacob Rubak Holm; Bram Timmermans; Christian Richter Ostergaard
  4. Labour market adjustment in Europe during the crisis: microeconomic evidence from the wage dynamics network survey By Mario Izquierdo; Juan Francisco Jimeno; Theodora Kosma; Ana Lamo; Stephen Millard; Tairi Room; Eliana Viviano
  5. Why do manufacturing firms produce services? Evidence for the servitization paradox in Belgium By Catherine Fuss; Pierre Blanchard; Claude Mathieu
  6. Does manufacturing stir up innovation? By Alex Coad; Antonio Vezzani
  7. Technology-specific Production Functions By M. Battisti; F. Belloc; M. Del Gatto
  8. Between Malthus and the industrial take-off: regional inequality in Sweden, 1571-1850 By Enflo, Kerstin; Missiaia, Anna
  9. Innovation Trends and Industrial Renewal in Finland and Sweden 1970-2013 By Kander, Astrid; Taalbi, Josef; Oksanen, Juha; Sjöö, Karolin; Rilla, Nina
  10. Is Job Polarization a Recent Phenomenon? Evidence from Sweden, 1950–2013, and a Comparison to the United States By Gustavsson, Magnus

  1. By: Giovanni Dosi; Andrea Roventini; Emanuele Russo
    Abstract: In this paper we present a multi-country, multi-industry agent-based model investigating the different growth patterns of interdependent economies. Each country features a Schumpeterian engine of endogenous technical change which interacts with Keyneasian/Kaldorian demand generation mechanisms. National growth trajectories are driven by firms' accumulation of technological knowledge, which in turn also leads to emergent specialization patterns in different industries. Interactions among economies occur via trade flows, stemming from the competition of firms in international markets. Simulation results show the emergence of persistent income divergence among countries leading to polarization and club formation. Moreover, each country experiences a structural transformation of its productive structure during the development process. Such dynamics results from firm-level virtuous (or vicious) cycles between knowledge accumulation, trade performances, and growth dynamics. The model accounts for a rich ensemble of empirical regularities at macro, meso and micro levels of aggregation.
    Keywords: Endogenous growth, structural change, technology-gaps, global divergence, absolute, advantages, agent-based models.
    Date: 2017–12–11
  2. By: Baum, Christopher F (Department of Economics, Boston College, Chestnut Hill, MA and Department of Macroe- conomics, DIW Berlin); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Nabavi, Pardis (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper studies firms' capability to recombine internal and local knowledge. It measures the outcome in terms of total productivity growth.Using Swedish data on commuting time for face-to-face contacts across all 290 municipalities, we employ a time sensitive approach for calculating localized knowledge within a municipality and and its close neighbors. Internal knowledge is captured by register data on firms' innovation intensity. The two sources of knowledge are modeled in a production function setting by discrete composite variables with different combinations of input factors. Applying the model on Swedish firm level panel data, we find strong evidence of differences in the capacity to benefit from external knowledge among persistent innovators, temporary innovators and non-innovators. The results are consistent regardless of whether innovation efforts are measured in terms of the frequency of patent applications or the level of R&D investment.
    Keywords: Innovation strategies; localized knowledge; patents; TFP growth; panel data
    JEL: C23 O31 O32
    Date: 2017–12–12
  3. By: Jacob Rubak Holm (Aalborg University); Bram Timmermans (Aalborg University); Christian Richter Ostergaard (Aalborg University)
    Abstract: This report analyses the role of multinational R&D intensive firms in job polarization. It also investigates how these firms affect the labour market in terms of wage growth and labour mobility. Firms appearing on the EU Industrial R&D Investment Scoreboard account for a significant share of economic activity in Denmark measured by employment, innovation activity, and R&D expenditures. Domestic firms listed on the scoreboard are the largest and most innovative, but subsidiaries of foreign scoreboard firms are still larger and more innovative compared to non-scoreboard firms. Relying on information from register data the report demonstrates that R&D spending among scoreboard firms is a complement to high skill jobs, while it substitutes low skill jobs. Thus, scoreboard firms are more involved in upgrading than polarization. Organisational change has an effect similar to that of R&D, while there is indication that innovation is a complement for low skilled jobs. Labour flows, particularly of high skilled workers, are stronger among scoreboard firms than between scoreboard firms and other firms. Thus, labour flows in networks instead of appearing in labour market pools, and non-scoreboard firms are kept out of the "knowledge spill-over" loops, providing them with fewer opportunities to learn from the scoreboard firms.
    Keywords: MNC, R&D, employment, skill, job polarization
    Date: 2017–11
  4. By: Mario Izquierdo (Banco de Espana); Juan Francisco Jimeno (Banco de Espana); Theodora Kosma (Bank of Greece); Ana Lamo (European Central Bank); Stephen Millard (Bank of England); Tairi Room (Eesti Pank); Eliana Viviano (Banca d’Italia)
    Abstract: Against the backdrop of continuing adjustment in EU labour markets in response to the Great Recession and the sovereign debt crisis, the European System of Central Banks (ESCB) conducted the third wave of the Wage Dynamics Network (WDN) survey in 2014-15 as a follow-up to the two previous WDN waves carried out in 2007 and 2009. The WDN survey collected information on wage-setting practices at the firm level. This third wave sampled about 25,000 firms in 25 European countries with the aim of assessing how firms adjusted wages and employment in response to the various shocks and labour market reforms that took place in the European Union (EU) during the period 2010-13. This paper summarises the main results of WDN3 by identifying some patterns in firms’ adjustments and labour market reforms. It seeks to lay out the main lessons learnt from the survey in terms of both the general response of EU labour markets to the crisis and how these responses varied across the countries that took part in the survey.
    Keywords: Wage Dynamics Network; Survey data; Labour market adjustment; Labour market reforms
    JEL: E24 J30 J52 J68
    Date: 2017–09
  5. By: Catherine Fuss (Economics and Research Department, NBB); Pierre Blanchard (UPEC); Claude Mathieu (UPEC)
    Abstract: The increasing role of services in GDP results from the growing share of service industries, but also from the fact that firms produce services along with goods. This paper investigates the determinants of service provision by manufacturing firms. First, it develops a model of differentiated products with, on the demand side, complementarities between the firm’s goods and services, and, on the supply side, rivalry in the allocation of expertise between the production of goods and the provision of services. Second, it provides an econometric assessment of the determinants of servitization for manufacturing firms, using a fractional Probit model with heterogeneity, controlling for endogeneity with respect to unobserved firm characteristics. Both the theoretical model and empirical estimates point to a non-linear relationship between servitization and firm productivity. The relationship is further shaped by the sector environment as well as intrinsic characteristics of the goods and services supplied.
    Keywords: Services, multi-product firms, firm behavior, Total Factor Productivity, panel data analysis, non linear model.
    JEL: D24 D29 L11 L22 L23 L25
    Date: 2017–11
  6. By: Alex Coad (CENTRUM Católica Graduate Business School, Pontificia Universidad Católica del Perú, Lima, Perú); Antonio Vezzani (European Commission - JRC)
    Abstract: Because of its positive contribution to employment and economic growth, the EU has set a manufacturing target of 20%. This could also boost R&D, productivity and exporting. Our analyses do not find empirical evidence that a large manufacturing sector has a direct influence on exporting activity or productivity growth. We find a positive association between manufacturing and R&D investment. The EU manufacturing strategy could help reaching the 3% R&D intensity target. However, the link between manufacturing and R&D depends on the industrial structure of a country. Support to new high-tech sectors should be coupled with actions to encourage technological upgrade in existing ones.
    Keywords: Manufacturing, R&D, exporting, productivity, industrial policy, industrial renaissance
    Date: 2017–11
  7. By: M. Battisti; F. Belloc; M. Del Gatto
    Abstract: We rely on mixture models to estimate technology-specific production functions avoiding any type of ex-ante assumption on the degree of technological sharing across firms and leaving the number of available technologies unconstrained. Internationally comparable firm-level data are used, to potentially capture all possible technologies available worldwide. Differently from conventional TFP estimates, where the terms "TFP", "productivity" and "technology" are often used interchangeably, our approach enables us to isolate the contribution to labour productivity stemming from technology (i.e. between-technology TFP) from the contribution associated to idiosyncratic productivity shocks not related to technology (i.e. within-technology TFP). While we find the former to be much larger than the latter in most sectors, the relative role of these two dimensions varies considerably across firms, being often reversed. We also find that the firm-level gaps are non-linearly correlated with the international flows of technology, as measured by the OECD country-sector technology payments and receipts. In particular, we show higher incoming (outcoming) flows of technology to be associated to higher (lower) average and dispersion of the between-technology TFP gaps. This stresses the growing importance of the availability of internationally comparable data in dealing with the technological dimension of firm-level productivity.
    Keywords: tfp;technology adoption;production function estimation;mixture models
    Date: 2017
  8. By: Enflo, Kerstin (Department of Economic History, Lund University); Missiaia, Anna (Department of Economic History, Lund University)
    Abstract: The causes and extent of regional inequality in the process of economic growth are at the core of historical economic research. So far, much attention has been devoted to studying the role of industrialization in driving regional divergence. But empirical studies on relatively unequal countries such as Italy or Spain show that inequality was already high when their modern industrialization began (Felice, 2011; Rosés et al., 2010). This paper studies the extent and drivers of pre-industrial inequality for the first time with reference to a pre-industrial European economy. Using new estimates of regional GDP for the regions of Sweden for the period 1571-1850 (Enflo and Missiaia, 2017), we find that regional inequality increased dramatically between 1571 and 1750 and stayed high until the mid-19th century. This result discards the view that industrial take-off was the main driver of regional divergence. Decomposing the Theil index for GDP per worker, we find that the bulk of inequality from 1750 onwards was driven by structural differences across sectors rather than different regional productivity within sectors. We then show that counties with higher agricultural productivity followed a classic Malthusian pattern in its population dynamics when experiencing technological advancement, while ones with higher industrial productivity did not. The difference in the two sectors is what boosted pre-industrial regional inequality. We suggest that institutional factors such as the creation of the Swedish Empire, the monopoly trading rights for Stockholm and the protective industrial policy explain this exceptional pattern.
    Keywords: regional GDP; Sweden; long-run regional inequality; pre-industrial regional development; Malthusian dynamics
    JEL: N01 N13 N93
    Date: 2017–12–12
  9. By: Kander, Astrid (Department of Economic History, Lund University); Taalbi, Josef (Department of Economic History, Lund University); Oksanen, Juha; Sjöö, Karolin; Rilla, Nina
    Abstract: We examine trends in innovation output for two highly ranked innovative countries: Finland and Sweden (1970-2013). Our novel dataset, collected using the LBIO (literature-based innovation output) method, suggests that the innovation trends are positive for both countries, despite an extended downturn in the 1980s. The findings cast some doubt on the proposition that the current stagnation of many developed countries is due to a lack of innovation and investment opportunities. Our data show that Finland catches up to, and passes, Sweden in innovation output in the 1990s. In per capita terms, Finland stays ahead throughout the period. We find that the strong Finnish performance is largely driven by innovation increase in just a handfull of industries. Both countries saw a rise in innovation during the dot-com era and the structural changes that followed. Since 2000 however, Sweden has outperformed Finland in terms of total innovations, especially in machinery and ICT, while the Finnish rate of innovation has stabilized. We suggest that these patterns may be explained by different paths of industrial renewal.
    Keywords: innovation; literature-based innovation output; industrial renewal; structural decomposition; structural change
    JEL: N14 O30 O47
    Date: 2017–12–06
  10. By: Gustavsson, Magnus (Department of Economics)
    Abstract: In this paper, I first show that Swedish job polarization is––contrary to common belief––a long-run phenomenon: the share of middle-wage jobs has declined relative to the highest- and lowest-paid jobs since at least the 1950s. Based on previous results for the US, I then demonstrate that the same major employment shifts across routine and nonroutine jobs drive long-run job polarization in both Sweden and the US. In particular, the shrinking manufacturing sector, with the subsequent decline of routine manual (blue-collar) jobs, stands out as the main explanation for why job polarization is a long-run phenomenon. However, consistent with the hypothesis of routine-biased technological change, both countries display across-the-board declines of routine jobs from around the 1980s, as well as polarizing employment patterns not only between but also within industries. But despite these trend breaks, Sweden actually experienced a stronger job-polarization process—a more pronounced hollowing out of the job-wage distribution—in the pre- than in the post 1980-era.
    Keywords: Automation; Industrial Composition; Routine-Biased Technological Change; Routinization; Structural Change
    JEL: J21 J23 N10 N30 O33
    Date: 2017–11–16
  11. By: Liis Roosaar, Jaan Masso, Urmas Varblane
    Abstract: This paper aims to clarify how changes in the age and wage composition of the labour force are related to the productivity of firms over the business cycle. Based on a matched employer-employee database of Estonian firms from 2006–2014, we decompose changes in the labour force and distinguish between hired, separated and staying workers. Considering the age and wage of workers, we link changes in the labour force to changes in productivity. Using fixed effect panel data analysis we indicate that among high-waged employees middle-aged are the most productive, the productivity decreases with age but remains higher for old compared to young. the increase in labour productivity is supported by the decreasing share of employees with the lowest productivity. The share of high-income employees was reduced in the crisis and later mostly low-income employees were hired. In addition, structural changes have accelerated the process of ageing. There are, however, sector-specific differences because in knowledge intensive services, ageing is not as prevalent as in industry. We also show that labour productivity is higher in the youngest quartile than in the oldest quartile of enterprises in all four periods.
    Keywords: productivity, labour productivity, ageing, Estonia
    JEL: J23 J24 J31 J63 M51
    Date: 2017

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