nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2018‒11‒12
nine papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Technical progress and growth since the crisis By Philippe Aghion; Céline Antonin
  2. New Technologies, Global Value Chains, and Developing Economies By Dani Rodrik
  3. Globalisation, structural change and innovation in emerging economies: The impact on employment and skills By Vivarelli, Marco
  4. And then he wasn't a she : Climate change and green transitions in an agent-based integrated assessment model By Francesco Lamperti; Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Sandro Sapio
  5. Research and innovation policy in Italy By Nascia, Leopoldo; Pianta, Mario
  7. Imports, Exports and Domestic Innovation By Boddin, Dominik
  8. Regional alignement and productivity growth By Ludovic Dibiaggio; Benjamin Montmartin; Lionel Nesta
  9. Connecting to Power: Political Connections, Innovation, and Firm Dynamics By Akcigit, Ufuk; Baslandze, Salomé; Lotti, Francesca

  1. By: Philippe Aghion (Harvard University (Cambridge, Massachusetts)); Céline Antonin (Observatoire français des conjonctures économiques)
    Abstract: The 2008 crisis revived doubts about growth and resuscitated the debate on secular stagnation initiated by Hansen in 1938. Particularly in a post-crisis context of zero or very low growth, Schumpeterian theory may seem to be outdated. Nevertheless, in this article, we show that it remains a valid conceptual framework. We begin by recalling the main highlights of Schumpeter's model of growth. We then argue that this conceptual framework remains relevant to many aspects of growth, notably secular stagnation, structural reforms and the debate on inequality. We show that because of creative destruction, the growth in productivity induced by innovation is underestimated. In addition, we explain why the Schumpeterian framework calls for a complementarity between structural reforms and macroeconomic policy. Finally, we show the positive impact of innovation and creative destruction on social mobility.
    Keywords: Technical progress; Growth; Schumpeter; Innovation; Secular stagnation; Inequality; Structural reforms
    Date: 2018–09
  2. By: Dani Rodrik
    Abstract: Many of the exports of developing countries are channeled through global value chains (GVCs), which also act as conduits for new technologies. However, new capabilities and productive employment remain limited so far to a tiny sliver of globally integrated firms. GVCs and new technologies exhibit features that limit the upside and may even undermine developing countries’ economic performance. In particular, new technologies present a double whammy to low-income countries. First, they are generally biased towards skills and other capabilities. This bias reduces the comparative advantage of developing countries in traditionally labor-intensive manufacturing (and other) activities, and decreases their gains from trade. Second, GVCs make it harder for low-income countries to use their labor cost advantage to offset their technological disadvantage, by reducing their ability to substitute unskilled labor for other production inputs. These are two independent shocks that compound each other. The evidence to date, on the employment and trade fronts, is that the disadvantages may have more than offset the advantages.
    JEL: O30 O40
    Date: 2018–10
  3. By: Vivarelli, Marco (UNU-MERIT, IZA, and Università Cattolica del Sacro Cuore, Milano)
    Abstract: This paper aims to provide a critical overview of the drivers that the relevant theoretical and empirical literature suggests being crucial in dealing with the challenges an emerging country may encounter in its attempts to further catch-up a higher income status, with a particular focus devoted to the implications for the domestic labour market. In the first part of the paper, attention will be focused on structural change, capability building and technological progress, trying to map - using different taxonomies put forward by the innovation literature - the concrete ways through which an emerging country can engage a successful catching-up, having in mind that developing countries are deeply involved into globalised markets where domestic innovation has to be complemented by the role played by international technology transfer. In the second part of the paper, the focus will be moved to the possible consequences of this road to catching-up in terms of employment and skills. In particular, the prescriptions by the conventional trade theory will be contrasted with a view taking into account technology transfer, labour-saving technological progress and skill-enhancing trade.
    Keywords: catching-up, structural change, globalisation, capabilities, technology transfer, technologic change, innovation, emerging economies
    JEL: O14 O31 O33
    Date: 2018–10–23
  4. By: Francesco Lamperti (Université Panthéon-Sorbonne - Paris 1 (UP1)); Giovanni Dosi (Laboratory of Economics and Management); Mauro Napoletano (Observatoire français des conjonctures économiques); Andrea Roventini (Laboratory of Economics and Management (LEM)); Sandro Sapio (Universita degli studi di Napoli "Parthenope" [Napoli])
    Abstract: In this work, we employ an agent-based integrated assessment model to study the likelihood of transition to green, sustainable growth in presence of climate damages. The model comprises heterogeneous fossil-fuel and renewable plants, capital- and consumption-good firms and a climate box linking greenhouse gasses emission to temperature dynamics and microeconomic climate shocks affecting labour productivity and energy demand of firms. Simulation results show that the economy possesses two statistical equilibria: a carbon-intensive lock-in and a sustainable growth path characterized by better macroeconomic performances. Once climate damages are accounted for, the likelihood of a green transition depends on the damage function employed. In particular, aggregate and quadratic damage functions overlook the impact of climate change on the transition to sustainability; to the contrary, more realistic micro-level damages are found to deeply influence the chances of a transition. Finally, we run a series of policy experiments on carbon (fossil fuel) taxes and green subsidies. We find that the effectiveness of such marketbased instruments depends on the different channels climate change affects the economy through, and complementary policies might be required to avoid carbon-intensive lock-ins.
    Keywords: Climate change; Agent based models; Transition; Energy policy; Growth
    JEL: C63 Q40 Q50 Q54
    Date: 2018–09
  5. By: Nascia, Leopoldo; Pianta, Mario
    Abstract: Italy’s research and innovation are examined in this article moving from the structure of the country’s economy and innovation system, examining the dynamics of private and public activities and the impact of policies. As a result of the long recession started in 2008, industrial production and investment experienced dramatic reductions, weakening business performances in R&D and innovation; policies have relied on ‘horizontal’ tax incentives for R&D, patenting and new machinery, with limited effects. Austerity-driven reduction of public expenditure has led to major cuts in public R&D and university budgets, combined with new rules for evaluation and merit-based financing. As a result, gaps between Italy’s research and innovation and EU average performances have increased. Four key policy questions are identified: the possibility for Italians firms to grow with modest technological activities; the longer term impact of underfunding the public R&D and university system; the consequences of a low presence of university graduates in the labour force; the sustainability of the increasing regional divergence within Italy’s research and innovation system.
    Keywords: R&D, innovation, technology policy, Italy
    JEL: O31 O33 O52
    Date: 2018
  6. By: Tanel Rebane
    Abstract: This paper examines the complementary relationship between product innovation, marketing innovation and cooperation with clients, based on data from Estonian firms. The author evaluated complementary relationship in terms of its effect on the firm’s total factor productivity. This study uses the Community Innovation Survey (CIS) and Estonian Business Register data from the years 2002–2012 and the Heckman selection model to research the complementarity effect between studied innovation activities using the supermodularity approach. The results show that product innovation and marketing innovation are complementary in the service industry, but in manufacturing industry there is lack of evidence for the effect of complementarity. Cooperation with clients showed inconclusive complementarity test results involving both innovation types in both industries. Using panel data as a robustness test showed more insights into the complementary effects between cooperation with clients and the studied forms of innovation. However, the results show a weak complementarity effect between cooperation and innovation and suggest that there is still no clear complementarity effect.
    Keywords: Product innovation, Marketing innovation, Cooperation with clients, Complementarity, Performance
    JEL: C13 D24 L25 O30
    Date: 2018
  7. By: Boddin, Dominik
    Abstract: By crawling online data, I create a new long-term patenting panel dataset for Germany to identify the causal effect of trade integration with Eastern Europe and China on patenting in the period 1993-2012. I exploit the cross-regional variation in the German industry structure and use trade flows to other advanced economies as instruments for regional import and export exposure. I find that an increase in the net trade exposure (defined as import- minus export exposure) causes an increase in regional patenting. This effect is purely driven by a positive link between import exposure and innovation, whereas export exposure does not influence innovation. Interestingly, the effects are heterogeneous across exposure origin. The positive link between import exposure and innovation is fully explained by trade integration with Eastern Europe. Increasing integration with China has no effects on innovation.
    JEL: F14 O30 R11 R12
    Date: 2018
  8. By: Ludovic Dibiaggio (Histoire et Critique des Arts - Centre d'étude et de recherche d'archéologie méditerranéenne et atlantique. UHB); Benjamin Montmartin (Observatoire français des conjonctures économiques); Lionel Nesta (Observatoire français des conjonctures économiques)
    Abstract: We propose the concept of regional alignment to suggest that synergistic relations among the scientific expertise, technological specialization and industry composition of regions affect regional productivity growth. In this paper, we test an extended conditional β-convergence model using data on 94 French departments (NUTS3) for the period 2001-2011. Our results indicate that a conditional β-convergence is associated with a σ-divergence process in the total factor productivity (TFP) growth of French regions. This process is strongly affected by the level of regional alignment. Indeed, we find evidence that regional alignment both directly and indirectly influences regional productivity growth. The indirect effect of regional alignment materializes through its leverage on R&D investment, which is one of the most important drivers of productivity growth. Moreover, using a heterogeneous coefficients model, we show that the positive effect of regional alignment on TFP growth increases with the industrial diversity of regions, which suggests that regional alignment increases the value of Jacobs externalities more than Marshall-ArrowRomer (MAR) externalities. KEY
    Keywords: Regional alignement; β-convergence; Productivity growth; Multi-regional model
    JEL: O30 O40 R11
    Date: 2018–09
  9. By: Akcigit, Ufuk; Baslandze, Salomé; Lotti, Francesca
    Abstract: Do political connections affect firm dynamics, innovation, and creative destruction? We study Italian firms and their workers to answer this question. Our analysis uses a brand-new dataset, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national 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. We identify a leadership paradox: When compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity - a result that we also confirm using a 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. Our model highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity.
    Keywords: creative destruction; Firm Dynamics; Innovation; Political Connections; productivity
    JEL: D7 O3 O4
    Date: 2018–10

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