nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2018‒09‒03
twelve papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. The Technology Frontier and the Rise and Fall of Cities By Enrico Berkes; Marti Mestieri; Ricardo Dahis
  2. Structural change, productivity growth and labour market turbulence in Africa By Mensah, Emmanuel; Owusu, Solomon; Foster-McGregor, Neil; Szirmai, Adam
  3. Do Firms Mitigate or Magnify Capital Misallocation? Evidence from Plant-Level Data By Matthias Kehrig; Nicolas Vincent
  4. Barriers to Entry and Regional Economic Growth in China By Loren Brandt; Gueorgui Kambourov; Kjetil Storesletten
  5. Productivity, technical efficiency and technological change in French agriculture during 2002-2014: A Färe-Primont index decomposition By Dakpo, K Hervé; Desjeux, Yann; Jeanneaux, Philippe; Latruffe , Laure
  6. R&D, embodied technological change and employment: Evidence from Spain By Pellegrino, Gabriela; Piva, Mariacristina; Vivarelli, Marco
  7. Firm Entry and Exit and Aggregate Growth By Jose Asturias; Kim Ruhl; Sewon Hur; Timothy Kehoe
  8. Connecting to Power: Political Connections, Innovation, and Firm Dynamics By Salome Baslandze
  9. Returns to Scale, Productivity Measurement, and Trends in U.S. Manufacturing Misallocation By Sui-Jade Ho; Dimitrije Ruzic
  10. Deep learning, deep change? Mapping the development of the Artificial Intelligence General Purpose Technology By J. Klinger; J. Mateos-Garcia; K. Stathoulopoulos
  11. Capital deepening and agricultural labor productivity By Timo Boppart; Hannes Malmberg; Per Krusell
  12. Employer Size and Spinout Dynamics By Faisal Sohail

  1. By: Enrico Berkes (Northwestern University); Marti Mestieri (Northwestern University); Ricardo Dahis (Northwestern University)
    Abstract: Abstract We analyze the universe of U.S. patents over the period 1830-2015. We document how innovation patterns have evolved over time and space, paying special attention to the evolution of leading technological sectors and the location of innovation hubs. We infer the leading technologies at different points in time from the evolution of the patent citation network. We document the rise and fall in prominence of different technologies and show that the technology frontier has moved towards more income elastic and skill-intensive sectors. We document innovation patterns at the city level using geocoded information for all patents in our sample. We find that innovation has become more clustered in space over time and, at the same time, the average distance between inventors of a patent has also increased over time. We then analyze whether the technological mix of a city has predictive power for future city growth. We also explore whether recombinant growth has become more prominent over time.
    Date: 2018
  2. By: Mensah, Emmanuel (UNU-MERIT); Owusu, Solomon (UNU-MERIT); Foster-McGregor, Neil (UNU-MERIT); Szirmai, Adam (UNU-MERIT)
    Abstract: This paper combines a standard decomposition of labour productivity with a decomposition of labour market turbulence to study the role of structural change and job reallocation in the economic growth performance of African countries over the past fifty years using an updated and expanded version of the Africa Sector Database (ASD) developed by the Groningen Growth and Development Centre (GGDC). The results show that productivity growth has been generally low since the 1960s with moderate contributions from structural change across the entire period. Although productivity growth from structural change is generally low, a regional comparison shows that structural change is more rapid in East Africa than in the other regions of sub-Saharan Africa (SSA). While structural change accounts for more than half of the labour productivity growth in East Africa, within-sector productivity growth accounts for more than half of the labour productivity growth in West Africa and Southern Africa. Structural change is characterised by a net reallocation of workers across different sectors. As such, we compute the labour market turbulence effect of structural change. The turbulence effect of structural change has been mostly felt in the Service Sector due to volatile demand and the high level of informality. The paper further makes the first attempt to estimate the effect of labour market flexibility on job reallocation in Africa. The results show that more rigid labour markets reduce job reallocation across sectors impeding structural change and productivity growth in Africa.
    Keywords: Labour Market Turbulence, Productivity Growth, Structural Change, Africa
    JEL: O11 O14 O41 O43 O57 J21
    Date: 2018–06–15
  3. By: Matthias Kehrig (Duke University); Nicolas Vincent (HEC Montreal)
    Abstract: Almost two thirds of the cross-plant dispersion in marginal revenue products of capital occurs across plants within the same firm rather than between firms. Even though firms allocate investment very differently across their plants, they do not equalize marginal revenue products across their plants. We reconcile these findings in a model of multi-plant firms, physical adjustment costs and credit constraints. Credit constrained multi-plant firms can utilize internal capital markets by concentrating internal funds on investment projects in only a few of their plants in a given period and rotating funds to another set of plants in the future. The resulting increase in within-firm dispersion of marginal revenue products of capital is hence not a symptom of misallocation within the firm, but rather actions taken by the firm to mitigate external credit constraints and adjustment costs of capital. Economies with multi-plant firms produce more aggregate output despite higher dispersion in marginal revenue products of capital compared to economies with single-plant firms. Because emerging economies are predominantly populated by single-plant firms, the gains from reducing their distortions to the level of developed are larger than previously thought.
    Date: 2018
  4. By: Loren Brandt (University of Toronto); Gueorgui Kambourov (University of Toronto); Kjetil Storesletten (University of Oslo)
    Abstract: The non-state manufacturing sector has been the engine of China's economic transformation. Up through the mid-1990s, the sector exhibited large regional differences; subsequently we observe rapid convergence in terms of new firm start-up rates, productivity, and wages. To analyze the drivers of this behavior, we construct a Melitz (2003) model that incorporates location-specific capital wedges, output wedges, and a novel entry barrier. Using Chinese Industry Census data for 1995, 2004, and 2008, we estimate these wedges and examine their role in explaining differences in performance across prefectures and over time. Entry barriers turn out to be the salient friction for explaining performance differences. We investigate the empirical covariates of these entry barriers and find that barriers are causally related to the size of the state sector. Thus, the downsizing of the state sector after 1997 may be important in explaining the rapid manufacturing growth over the 1995-2008 period.
    Date: 2018
  5. By: Dakpo, K Hervé; Desjeux, Yann; Jeanneaux, Philippe; Latruffe , Laure
    Abstract: The objective of the article is to assess productivity change in French agriculture during 2002-2014, namely total factor productivity (TFP) change and its components technological change and technical efficiency change. For this, we use the economically-ideal Färe-Primont index which verifies the multiplicatively completeness property and is also transitive, allowing for multi-temporal/lateral comparisons. To compare the technology gap change between the six types of farming considered, we extend the Färe-Primont to the meta-frontier framework. Results indicate that during 2002-2014, all farms experienced a TFP progress. Pig and/or poultry farms had the lowest TFP increase, while beef farms had the highest (19.1%). The latter farms had the strongest increase in technical efficiency, while technological progress was the highest for mixed farms. The meta-frontier analysis shows that field crop farms’ technology is the most productive of all types of farming.
    Keywords: Agricultural and Food Policy, Farm Management
    Date: 2017
  6. By: Pellegrino, Gabriela (EPFL, Lausanne); Piva, Mariacristina (Università Cattolica del Sacro Cuore, Piacenza); Vivarelli, Marco (UNU-MERIT, and Universita’ Cattolica del Sacro Cuore, Milano)
    Abstract: In this work, we test the employment impact of distinct types of innovative investments using a representative sample of Spanish manufacturing firms over the period 2002-2013. Our GMM-SYS estimates generate various results, which are partially in contrast with the extant literature. Indeed, estimations carried out on the entire sample do not provide statistically significant evidence of the expected labour-friendly nature of innovation. More in detail, neither R&D nor investment in innovative machineries and equipment (the so-called embodied technological change, ETC) turn out to have any significant employment effect. However, the job-creation impact of R&D expenditures becomes highly significant when the focus is limited to the high-tech firms. On the other hand - and interestingly - ETC exhibits its labour-saving nature when SMEs are singled out.
    Keywords: Innovation, R&D, Embodied Technological Change, Employment, GMM-SYS
    JEL: O33
    Date: 2018–06–11
  7. By: Jose Asturias (Georgetown University in Qatar); Kim Ruhl (Pennsylvania State University); Sewon Hur (University of Pittsburgh); Timothy Kehoe (University of Minnesota)
    Abstract: Applying the Foster, Haltiwanger, and Krizan (FHK) (2001) decomposition to plant-level manufacturing data from Chile and Korea, we find that a larger fraction of aggregate productivity growth is due to entry and exit during periods of fast GDP growth. Studies of other countries confirm this empirical relationship. To analyze this relationship, we develop a simple model of firm entry and exit based on Hopenhayn (1992) in which there are analytical expressions for the FHK decomposition. When we introduce reforms that reduce entry costs or reduce barriers to technology adoption into a calibrated model, we find that the entry and exit terms in the FHK decomposition become more important as GDP grows rapidly, just as in the data from Chile and Korea.
    Date: 2018
  8. By: Salome Baslandze (EIEF - Einaudi Institute for Economics a)
    Abstract: We study the Italian firms and their workers to answer this question. Our analysis uses a brand-new data spanning the period from 1993 to 2014 where we merge: (i) firm-level balance sheet data, (ii) the social security data on the universe of workers, (iii) patent data from the European Patent Office, (iv) registry of local politicians, and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. Market leaders are much more likely to be politically connected and less likely to innovate, compared to their competitors. In addition, connections relate to higher survival and growth in employment and revenue but not in productivity – the result that we also confirm using regression discontinuity design. We build a firm dynamics model where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. The model highlights the new interaction between static gains and dynamic losses from rent-seeking for aggregate productivity.
    Date: 2018
  9. By: Sui-Jade Ho (Central Bank of Malaysia); Dimitrije Ruzic (University of Michigan)
    Abstract: Aggregate productivity suffers when workers and machines are not matched with their most productive uses. This paper builds a model that features industry-specific markups, industry-specific returns to scale, and establishment-specific distortions, and uses it to measure the extent of this misallocation in the economy. Applying the model to restricted U.S. census microdata on the manufacturing sector suggests that misallocation declined by 13% between 1982 and 2007. The jointly estimated markup and returns to scale parameters vary substantially across industries. Furthermore, while the average markup has been relatively constant, the average returns to scale declined over this period. The finding of declining misallocation starkly contrasts the 29% increase implied by the widely used Hsieh & Klenow (2009) model, which assumes that all establishments charge the same markup and have constant returns to scale. Accounting for the variation in markups and returns to scale leads to the divergence of misallocation estimates in this paper from those implied by the Hsieh-Klenow model.
    Date: 2018
  10. By: J. Klinger; J. Mateos-Garcia; K. Stathoulopoulos
    Abstract: General Purpose Technologies (GPTs) that can be applied in many industries are an important driver of economic growth and national and regional competitiveness. In spite of this, the geography of their development and diffusion has not received significant attention in the literature. We address this with an analysis of Deep Learning (DL), a core technique in Artificial Intelligence (AI) increasingly being recognized as the latest GPT. We identify DL papers in a novel dataset from ArXiv, a popular preprints website, and use CrunchBase, a technology business directory to measure industrial capabilities related to it. After showing that DL conforms with the definition of a GPT, having experienced rapid growth and diffusion into new fields where it has generated an impact, we describe changes in its geography. Our analysis shows China's rise in AI rankings and relative decline in several European countries. We also find that initial volatility in the geography of DL has been followed by consolidation, suggesting that the window of opportunity for new entrants might be closing down as new DL research hubs become dominant. Finally, we study the regional drivers of DL clustering. We find that competitive DL clusters tend to be based in regions combining research and industrial activities related to it. This could be because GPT developers and adopters located close to each other can collaborate and share knowledge more easily, thus overcoming coordination failures in GPT deployment. Our analysis also reveals a Chinese comparative advantage in DL after we control for other explanatory factors, perhaps underscoring the importance of access to data and supportive policies for the successful development of this complex, `omni-use' technology.
    Date: 2018–08
  11. By: Timo Boppart (IIES, Stockholm University); Hannes Malmberg (Stanford University); Per Krusell (Stockholm University)
    Abstract: Labor productivity differences across countries are larger in agriculture than in non-agriculture. This observation has lead the literature to look for agriculture-specific distortions/inefficiencies in poor countries. However, labor productivity is not equal to TFP, and, over time and across countries, input intensification is more rapid in agriculture than in other sectors. This paper examines to what extent intensification of land, intermediate input use, capital deepening, and skill upgrading can account for the observed pattern in labor productivities. We first turn to the aggregate U.S. time series and uncover quantitatively similar changes in capital deepening and labor productivity as suggested by the cross-country data. U.S. agricultural census data helps us to characterize and estimate an agricultural production function at the gross output level. We quantify the importance of factor intensification, and, finally, we put our theory in a dynamic general equilibrium framework that captures the structural transformation out of agriculture.
    Date: 2018
  12. By: Faisal Sohail (Washington University in St. Louis)
    Abstract: Most new firms are founded by former employees of existing firms - spinouts. This paper studies the relationship between employer size and spinout entry, size, and growth. Using data from Mexico, we document that employees from small firms are more likely to form spinouts than those from large firms. Second, spinouts from large employers start at a larger scale and grow faster than spinouts from small employers. Although a qualitatively similar relationship is observed in data from the U.S., there are large quantitative differences in the levels of spinout formation. To understand the impact of these differences on aggregate outcomes, we build a model of occupational choice and firm dynamics in which workers can learn from and adopt the productivity of their employers to form their own firms. In this framework, differences in the rates of spinout formation between Mexico and the U.S. are driven by differences in the efficiency with which employees learn from their employers. We interpret this efficiency as representing a form of managerial quality. The model, calibrated to match spinout entry rates across the two countries, can account for 13 and 19% of the cross-country variation in output per worker and firm growth respectively. These findings highlight the relevance of spinouts for aggregate outcomes, and the potential for managerial quality to not only impact incumbent firms but also future entrants.
    Date: 2018

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