nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2018‒02‒12
nine papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Technological catching-up, sales dynamics and employment growth: evidence from China’s manufacturing firms By Dosi, Giovanni; Yu, Xiaodan
  2. Innovation, Productivity Dispersion, and Productivity Growth By Lucia Foster; Cheryl Grim; John Haltiwanger; Zoltan Wolf
  3. Creative and science-oriented employees and firm-level innovation By Stephan Brunow; Antonia Birkeneder; Andrés Rodríguez-Pose
  4. Demand forces of technical change: evidence from the Chinese manufacturing industry By Andreas Beerli; Franziska J. Weiss; Fabrizio Zilibotti
  5. Employment protection legislation impacts on capital and skill composition By Cette Gilbert; Lopez Jimmy; Mairesse Jacques
  6. Internalizing global value chains: a firm-level analysis By Alfaro, Laura; Antras, Pol; Chor, David; Conconi, Paola
  7. Product diversification in Indian manufacturing By Boehm, Johannes; Dhingra, Swati; Morrow, John
  8. Technological change, automation and employment: A Short review of theory and evidence By K.V. Ramaswamy
  9. Access to finance and innovative activity of EU firms: A cluster analysis By Ferrando, Annalisa; Lekpek, Senad

  1. By: Dosi, Giovanni; Yu, Xiaodan
    Abstract: This paper investigates the microeconomics of employment dynamics, using a Chinese manufacturing firm-level dataset over the period 1998-2007. It does so in the light of a scheme of “circular and cumulative causation”, whereby firms’ heterogeneous productivity gains and sales dynamics, and innovation activities ultimately shape the patterns of employment dynamics. Using firm’s productivity growth as a proxy for process innovation, our results show that the latter correlates negatively with firm-level employment growth. Conversely, relative productivity levels, as such a general proxy for the broad technological advantages/disadvantages of each firm, do show positive effect on employment growth in the long-run through replicator-type dynamics. Moreover, firm-level demand dynamics play a significant role in driving employment growth, which more than compensate the labour-saving effect due to technological progress. Finally, and somewhat puzzlingly, the direct effects of product innovation and patenting activities on employment growth appear to be negligible.
    Keywords: Employment Growth,Demand,Product Innovation,Process Innovation,Export,China catching-up
    JEL: D22 J01 O33
    Date: 2018
  2. By: Lucia Foster; Cheryl Grim; John Haltiwanger; Zoltan Wolf
    Abstract: We examine whether underlying industry innovation dynamics are an important driver of the large dispersion in productivity across firms within narrowly defined sectors. Our hypothesis is that periods of rapid innovation are accompanied by high rates of entry, significant experimentation and, in turn, a high degree of productivity dispersion. Following this experimentation phase, successful innovators and adopters grow while unsuccessful innovators contract and exit yielding productivity growth. We examine the dynamic relationship between entry, productivity dispersion, and productivity growth using a new comprehensive firm-level dataset for the U.S. We find a surge of entry within an industry yields an immediate increase in productivity dispersion and a lagged increase in productivity growth. These patterns are more pronounced for the High Tech sector where we expect there to be more innovative activities. These patterns change over time suggesting other forces are at work during the post-2000 slowdown in aggregate productivity.
    Date: 2018–02
  3. By: Stephan Brunow; Antonia Birkeneder; Andrés Rodríguez-Pose
    Abstract: This paper examines the link between innovation and the endowments of creative and science-oriented STEM - Science, Technology, Engineering and Mathematics ? workers at the level of the firm and at the city-/regional-level in Germany. It also looks into whether the presence of these two groups of workers has greater benefits for larger cities than smaller locations, thus justifying policies to attract these workers in order to make German cities 'smarter'. The empirical analysis is based on a probit estimation, covering 115,000 firm-level observations between 1998 and 2015. The results highlight that firms that employ creative and STEM workers are more innovative than those that do not. However, the positive connection of creative workers to innovation is limited to the boundaries of the firm, whereas that of STEM workers is as associated to the generation of considerable innovation spillovers. Hence, attracting STEM workers is more likely to end up making German cities smarter than focusing exclusively on creative workers.
    Keywords: Innovation, Creative workers, STEM workers, Smart Cities, Spillover, Germany
    JEL: D22 J82 R12 J21 J24 R23
    Date: 2018–02
  4. By: Andreas Beerli; Franziska J. Weiss; Fabrizio Zilibotti
    Abstract: This paper investigates the effect of domestic market size on innovation activities across different durable good industries in the Chinese manufacturing sector. We address the endogeneity of market size by an IV strategy, based on a measure of potential market size, which is driven only by changes in the Chinese income distribution. This measure is exogenous to changes in prices and qualities of durable goods and is a valid instrument for expected future market size. Our results indicate that an increase in market size by one percent leads to an increase in firm-specific total factor productivity by 0.46 percent and an increase in labor productivity by 0:50 percent. These findings are robust to controlling for export behavior of firms and supply side drivers of R&D.
    Keywords: China, demand-induced innovation, directed technical change, durable goods, Economic growth, Engel curves, market size, middle class, non-homothetic preferences
    JEL: D31 L11 L68 O31 O33
    Date: 2018–01
  5. By: Cette Gilbert (Aix-Marseille School of Economics; CNRS; EHESS); Lopez Jimmy (Banque de France ; Université de Bourgogne Franche-Comté (LEDi)); Mairesse Jacques (CREST-ENSAE ; Maastricht University (UNU-MERIT) ; Banque de France ; NBER)
    Abstract: Research and Development (R&D) expenses and Information and Communication Technology (ICT) diffusion are key factors of modern growth and competitiveness. This study proposes an original investigation of the effects of the OECD Employment Protection Legislation (EPL) indicator on four capital and three labour skill components. Grounded on a country*industry unbalanced panel data sample for 14 OECD countries and 18 industries covering the years 1988 to 2007 and relying on a difference-in-difference econometric approach, we find that a change in EPL impacts differently the type and skill composition of respectively capital and labour. Strenthening EPL lowers ICT capital and, even more severily, R&D capital relatively to non-ICT and construction capital; it also works at the disadvantage of low-skill workers relatively to high-skill workers employment. These results confirm that a strenthening of EPL can be an impediment to the organizational change and a break to the risk taking so important to capture shares of globalized markets, thus driving to more regulation harmonization. An illustrative policy simulation based on our estimates suggests that structural reforms for more labour flexibility, weakening employment protection legislation for countries where it is particularly strong, could have a favourable impact on firms’ ICT and R&D investment and on the hiring of low-skill workers.
    Keywords: regulation, capital, R&D, ICT, skill
    JEL: E22 E24 O30 L50 O43 O47 C23
    Date: 2017–12–31
  6. By: Alfaro, Laura; Antras, Pol; Chor, David; Conconi, Paola
    Abstract: In recent decades, advances 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. We describe a property-rights model of firm boundary choices along the value chain that generalizes Antràs and Chor (2013). To assess the evidence, we construct firmlevel 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, as well as by the firm's productivity. Our results suggest that contractual frictions play an important role in shaping the integration choices of firms around the world
    Keywords: global value chains; sequential production; incomplete contracts
    JEL: D23 F14 F23 L20
    Date: 2017–10–01
  7. By: Boehm, Johannes; Dhingra, Swati; Morrow, John
    Abstract: The presence of global value chains challenges the neoclassical idea of the firm since it implies firms are not monolithic but are rather interdependent on the larger economic environment. Examining establishments, the smallest units of production within firms, sheds light on the microeconomic incentives determining the location of production and whether a firm produces a good or sources it. Most work on multiproduct firms looks at developed countries, but constraints on firm growth are greater in developing economies. We examine multiproduct establishments in India during a high growth period. Multiproduct establishments made up the bulk of manufacturing production, and their product turnover contributed 28 per cent to net sales growth. Unlike the nineties which witnessed drastic liberalization, establishments in the two-thousands dropped products at rates similar to those for the US. Sales dispersion across products also predicts product addition
    Keywords: multiproduct firms; product adoption; product diversity
    JEL: L1 L2 M2 O3
    Date: 2017–11–01
  8. By: K.V. Ramaswamy (Indira Gandhi Institute of Development Research; Institute of Economic Growth)
    Abstract: A selective survey of recent papers in the area of technological change, automation and employment is presented. The objective is to convey analytical ideas and the empirical evidence that have informed studies in this area of contemporary policy relevance. Automation occurs when a machine does work that might previously have been done by a person. How robots and automation affect the availability of jobs for labor force? There are very few emerging studies that address the issue with detailed data on robots usage and employment in different sectors of the economy. Based on our review of available studies and empirical evidence the following statements can be made: (1) Increasing automation and robots adoption do not seem to cause loss of employment in the aggregate (2) Low skilled workers in routine jobs are more likely to suffer job losses. (3) There will be demand for new types of skilled workers or new specializations within occupations. Prospective automation intensifies the degree of uncertainty in labor markets across countries.
    Keywords: Technological change,Automation, Robots,Skill Bias, employment
    JEL: J20 J23 J24 O30 O33
    Date: 2018–01
  9. By: Ferrando, Annalisa; Lekpek, Senad
    Abstract: The way firms finance their investments can potentially explain the heterogeneity of firms in terms of their innovation. We use a novel firm-level survey of the European Investment Bank (EIBIS) which provides information about a wide range of financing sources that firms use to fund their investment activities. The aforementioned survey also reveals a firms' degree of innovativeness. By applying a cluster analysis to group firms using information on their financing decisions, we investigate the link between finance and innovation of EU firms. We identify seven financing clusters to show that the degree of innovativeness (defined in terms of R&D or software investment, R&D and software turnover ratios, and the introduction of new products) increases with the diversification of financial instruments. Firms that use several financing instruments are more likely to invest in R&D and software activities and develop new products compared to firms that use a more limited number of financing instruments.
    Keywords: innovation,R&D,internal and external finance,cluster analysis
    JEL: D22 G32 O31
    Date: 2018

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