nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2018‒09‒10
nine papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Flowers of Evil? Industrialization and Long Run Development By Franck, Raphaël; Galor, Oded
  2. Technological change and economic development: endogenous and exogenous fluctuations By Marianna Epicoco
  3. Labour share developments over the past two decades: The role of technological progress, globalisation and “winner-takes-most” dynamics By Cyrille Schwellnus; Mathilde Pak; Pierre-Alain Pionnier; Elena Crivellaro
  4. How Cross-Boundary Disruptive-from-Above Superseded Incumbents' Sustaining Innovation in the Mobile Industry: Qualitative, Graphical and Computational Insights By Burgelman, Robert A.; Thomas, John K.
  5. Inter-firm Transaction Networks and Location in a City By OTAZAWA Toshimori; OHIRA Yuki; Jos VAN OMMEREN
  6. Some Simple Economics of Patent Protection for Complex Technologies By Denicolò, Vincenzo; Zanchettin, Piercarlo
  7. Innovation, Knowledge Diffusion, and Selection By Danial Lashkari
  8. The Natural Rate of Structural Change By Francisco Buera; Joseph Kaboski; Marti Mestieri
  9. Occupations, Skills and Barriers to Labor Reallocation By Georg Duernecker; Berthold Herrendorf

  1. By: Franck, Raphaël (The Hebrew University of Jerusalem); Galor, Oded (Brown University)
    Abstract: This research explores the effect of industrialization on the process of development. In contrast to conventional wisdom that views industrial development as a catalyst for economic growth, the study establishes that while the adoption of industrial technology was conducive to economic development in the short-run, it has detrimental effects on the standard of living in the long-run. Exploiting exogenous geographic and climatic sources of variation in the diffusion and adoption of steam engines across French departments during the early phases of industrialization, the research establishes that intensive industrialization in the middle of the 19th century increased income per capita in the subsequent decades but diminished it by the turn of the 21st century. The analysis further suggests that the adverse effect of earlier industrialization on long-run prosperity can be attributed to the negative impact of the adoption of unskilled-intensive technologies in the early stages of industrialization on the long-run level of human capital and thus on the incentive to adopt skill-intensive technologies in the contemporary era. Preferences and educational choices of second generation migrants within France indicate that industrialization has triggered a dual techno-cultural lock-in characterized by a reinforcing interaction between technological inertia, reflected by the persistence predominance of low-skilled-intensive industries, and cultural inertia, in the form of a lower predisposition towards investment in human capital. These findings suggest that the characteristics that permitted the onset of industrialization, rather than the adoption of industrial technology per se, have been the source of prosperity among the currently developed economies that experienced an early industrialization. Thus, developing economies may benefit from the allocation of resources towards human capital formation and skilled intensive sectors rather than toward the promotion of traditional unskilled-intensive industrial sectors.
    Keywords: economic growth, human capital, industrialization, steam engine, cultural inertia
    JEL: N33 N34 O14 O33
    Date: 2018–07
  2. By: Marianna Epicoco
    Abstract: This paper aims at exploring the endogenous and exogenous forces that determine long-run fluctuations of innovative and economic activity. It proposes that technological paradigm shifts, structural change and major fluctuations of production are the result of the same endogenous process. This is defined as a co-evolutionary process between technological and economic variables based on cumulative multiplier and accelerator feedback effects between investments in innovation and demand. Exogenous factors are supposed to act upon this endogenous process, influencing the length and amplitude of fluctuations. This framework contributes to extant literature as it envisages an explicit endogenous mechanism explaining cyclical fluctuations of innovative and economic activity, and, at the same time, incorporates exogenous factors. Moreover, by combining the Schumpeterian analyses of innovation dynamics with the multiplier and accelerator effects coming from Keynesian theories, the framework integrates the impact of technological variables on economic activity and vice versa. To provide a preliminary supporting evidence, we have fitted the ICT cycle and the economic cycle to patent and productivity data, respectively. Our results suggest that the growth potential of ICT could be declining. This situation may represent an important opportunity, for public policy and socioinstitutional actors, to orient future development toward socially desirable directions.
    Keywords: technological paradigm shift, structural change, economic fluctuations, co-evolution, productivity slowdown, ICT.
    JEL: O33 O40 O11 E32
    Date: 2018
  3. By: Cyrille Schwellnus; Mathilde Pak; Pierre-Alain Pionnier; Elena Crivellaro
    Abstract: Over the past two decades, real median wage growth in many OECD countries has decoupled from labour productivity growth, partly reflecting declines in labour income shares. This paper analyses the drivers of labour share developments using a combination of industry- and firm-level data. Technological change in the investment goods-producing sector and greater global value chain participation have compressed labour shares, but the effect of technological change has been significantly less pronounced for high-skilled workers. Countries with falling labour shares have witnessed both a decline at the technological frontier and a reallocation of market shares toward “superstar” firms with low labour shares (“winner-takes-most” dynamics). The decline at the technological frontier mainly reflects the entry of firms with low labour shares into the frontier rather than a decline of labour shares in incumbent frontier firms, suggesting that thus far this process is mainly explained by technological dynamism rather than anti-competitive forces.
    Keywords: global value chains, Labour share, skills, superstar firms
    JEL: D33 J24 L11 O33
    Date: 2018–09–04
  4. By: Burgelman, Robert A. (Stanford University); Thomas, John K. (?)
    Abstract: This study of the transformation of the mobile device industry examines how cross-boundary disruption (XBD) superseded the incumbents' sustaining innovation, which helps explain the rapid rise of Apple and Google Android and the equally rapid fall of Nokia and other incumbents between 2007 and 2013. Four concatenated strategic factors limited the incumbents' capacity to adapt: (1) incumbents' market myopia about latent unserved needs of the high-end customer segment, (2) incumbents' dynamic capabilities gaps for meeting these needs, (3) demand shift timing of high-end customers toward the disruptors' radically innovative products, and (4) the rapid growth of novel ecosystems around the disruptors' technology platforms. Graphical interpretation further elucidates these concatenated strategic factors and suggests computational implications. The paper's qualitative, graphical and computational insights help formulate a conceptual framework of XBD-from-above, which contributes to theory development about inter-industry disruption and transformation.
    Date: 2018–08
  5. By: OTAZAWA Toshimori; OHIRA Yuki; Jos VAN OMMEREN
    Abstract: This study contributes to the literature on the relationship between geographical and relation-based distances of economic agents. We aim to estimate the causal effect of a firm's position in the inter-firm transaction network on its spatial location within a city. Using micro data of inter-firm financial transactions for non-retail firms in the metropolitan areas of Japan, we demonstrate that the more central firms in transaction networks tend to have smaller inter-firm distances and therefore locate at more accessible places within the city. We also find that the results are robust to alternative specifications both of network centrality measures and spatial accessibility measures. It is also declared that the effect for single establishment firms are much stronger than that for multi-establishment firms. Furthermore, the result shows that this effect is noticeable for young firms in knowledge-intensive industries. The evidence suggests the potential importance of the inter-firm transaction pattern as a determinant of urban spatial configuration.
    Date: 2018–08
  6. By: Denicolò, Vincenzo; Zanchettin, Piercarlo
    Abstract: We analyze patent protection when innovative technologies are "complex" in that they involve sequential and complementary innovations. We argue that complexity affects the classic Nordhaus trade-off between innovation and static monopoly distortions. We parametrize the degree of sequentiality and that of complementarity and show that the optimal level of patent protection increases with both. We also address the issue of the optimal division of profit among different innovators.
    Keywords: Complementarity; Division of profit; Elasticity of the supply of inventions; Patent design; Sequential innovation
    JEL: O30 O40
    Date: 2018–07
  7. By: Danial Lashkari (Yale University)
    Abstract: This paper constructs a theory of industry growth through innovation and selection-driven creative destruction. Firms’ ideas determine their productivity and stochastically evolve over time. Firms innovate to improve their ideas and endogenously exit if unsuccessful. Entrants adopt the ideas of incumbents. In this model, when better ideas are innovated or adopted, they selectively replace worse ideas. Innovation externalities vary based on firm productivity: ideas generated by more productive firms create 1) longer-lasting positive externalities due to knowledge diffusion and 2) stronger negative externalities due to dynamic displacement of other firms. Therefore, the net external effect of innovation on aggregate productivity is heterogeneous and market equilibrium misallocates investments across firms. The solution to the social planner's problem suggests that optimal innovation policy instruments should depend on firm productivity. Quantitatively, the misallocations are large when the model is calibrated to firm-level data from US manufacturing and retail trade, and imply first-order considerations for the design of innovation policy.
    Date: 2018
  8. By: Francisco Buera (Washington University at St. Louis); Joseph Kaboski (University of Notre Dame); Marti Mestieri (Northwestern University)
    Abstract: Abstract Can the changes in the structure of consumption and production be described by a stable and parsimoneous model? Are there important deviations from these benchmark trends for subsets of countries and periods? We develop a generalized model of structural change that jointly considers the demand and production sides to answer these questions. Production is generalized to allow for time-varying factor shares and rich productivity dynamics. Demand is generalized to allow for persistent non-homotheticities and independent price elasticities. We estimate the model using data on sectoral value-added, capital and labor allocations, price indexes, and income per capita in a large panel of 39 countries.
    Date: 2018
  9. By: Georg Duernecker (University of Munich); Berthold Herrendorf (Arizona State University)
    Abstract: We study the role that barriers to entry into occupations play for the reallocation of labor across sectors and for hours worked in the market in the US and Germany. We document that relative to the US, Germany has stricter degree requirements in many occupations and has lower employment shares in occupations in which it has stricter education requirements. We quantify the implications of such barriers to entry into occupation for labor market outcomes in an overlapping-generations model in which individuals choose their sector and occupation. We calibrate the model to match the US structural transformation and the changes in the distribution of the employment shares of occupations. We then feed the stricter German degree requirements into the otherwise unchanged model. We find that as a result Germans in the model work considerably fewer hours than Americans in the service sector in particular and in the market in general.
    Date: 2018

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