nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2019‒05‒27
fourteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Long-Term Firm Growth: An Empirical Analysis of US Manufacturers 1959-2015 By Giovanni Dosi; Marco Grazzi; Daniele Moschella; Gary Pisano; Federico Tamagni
  2. Firm Size, Life Cycle Dynamics and Growth Constraints: Evidence from Mexico By Christian Saborowski; Florian Misch
  3. Trade Induced Technological Change: Did Chinese Competition Increase Innovation in Europe? By Douglas L. Campbell; Karsten Mau
  4. International Business Travel and Technology Sourcing By Hovhannisyan, Nune; Keller, Wolfgang
  5. Technology, Skills, and Globalization: Explaining International Differences in Routine and Nonroutine Work Using Survey Data By Lewandowski, Piotr; Park, Albert; Hardy, Wojciech; Yang, Du
  6. Technological innovation activities in the EU: a new perspective By Antonio Vezzani; Petros Gkotsis; Hector Hernandez; Pietro Moncada Paterno Castello
  7. Intermediate Goods-Skill Complementarity By Kozo Kiyota; Yoshinori Kurokawa
  8. Tales of the City: What Do Agglomeration Cases Tell Us About Agglomeration in General? By Giulia Faggio; Olmo Silva; William C. Strange
  9. Aggregate Implications of Changing Sectoral Trends By Foerster, Andrew; Hornstein, Andreas; Sarte, Pierre-Daniel G.; Watson, Mark W.
  10. Sectoral Composition of Output and the Wage Share: a Two-Sector Kaleckian Model. By Elton Beqiraj; Lucrezia Fanti; Luca Zamparelli
  11. Innovation Offshoring with Fully Endogenous Growth By Colin Davis; Ken-ichi Hashimoto
  12. Measuring the Routine and Non-Routine Task Content of 427 Four-Digit ISCO-08 Occupations By Emil Mihaylov; Kea Tijdens
  13. Is Super-Fast Broadband Negative? An IV-Estimation of the Broadband Effect on Firms' Sales and Employment Level By Nordin, Martin; Grenestam , Erik; Gullstrand , Joakim
  14. Peer Effects in Product Adoption By Bailey, Michael; Johnston, Drew; Kuchler, Theresa; Ströbel, Johannes; Wong, Arlene

  1. By: Giovanni Dosi; Marco Grazzi; Daniele Moschella; Gary Pisano; Federico Tamagni
    Abstract: Firm growth is an essential feature of market economies, shaping together macroeconomic performance and the evolution of industry structures. As a potential indicator of organizational 'fitness' within a competitive environment, firm growth is also a central concern to both the practice and theory of business strategy. Despite both its theoretical and practical importance, though, growth remains a poorly understood property of firms. While previous studies have documented the highly skewed nature of firm growth rates, we know far less about the persistence of growth rates over long-periods of time. For instance, do 'fast growers' tend to maintain their relative growth rates advantages over long-periods or is superior growth a transitory phenomenon? Is, as predicted by evolutionary and capability based theories of the firm, the process of firm growth path-dependent or is it more akin to a random walk? The answers to these questions are central to building a robust theory of firm growth. This paper attempts to address this gap in our empirical knowledge of firm growth using a dataset that spans 50 years, which allows the abandonment of the assumption, common to all incumbent studies, that the stochastic paths of all firms stem from the same generating process. These exploratory results indicate that growth rate persistence is there and my be even substantial for some firms, but it is rare. We also study the links between the micro- properties of firm growth within sectors and the patterns of aggregate growth of these same sectors. Indeed, we find circumstantial but widespread evidence that heterogeneity across firms correlates with industry dynamism.
    Keywords: Firm growth; Persistence; Industrial Dynamics; Firm heterogeneity
    Date: 2019–05–17
  2. By: Christian Saborowski; Florian Misch
    Abstract: This paper examines the variation in life cycle growth across the universe of Mexican firms. We establish two stylized facts to motivate our analysis: first, we show that firm size matters for development by illustrating a close correlation with state-level per capita incomes. Second, we show that few firms grow as much as their U.S. peers while the majority stagnates at less than twice their initial size. To gain insights into the distinguishing characteristics of the two groups, we then econometrically decompose life cycle growth across firms. We find that firms that have financial access and multiple establishments and that are formal, part of diversified industries and located in population centers can grow at sizeable rates.
    Date: 2019–05–02
  3. By: Douglas L. Campbell (New Economic School (NES)); Karsten Mau (Maastricht University)
    Abstract: Bloom, Draca, and Van Reenen (2016) find that Chinese competition induced a rise in patenting, IT adoption, and TFP by 30% of the total increase in Europe in the early 2000s. We find that the average patents per firm fell by 94% for the most Chinacompeting firms in their sample, but also by 94% for non-competing firms (starting from an initially higher level), and that various intuitive controls, such as controls for sectoral trends, renders the impact on patents-per-firm insignificant. We also find that while TFP appears to be positively correlated with the rise in Chinese competition, IV estimates are inconclusive, and other measures of productivity, such as value-added per worker and profits, are not correlated. Various instrumental and proxy variable approaches also do not support a positive impact of the rise of China on European patents.
    Keywords: Patents, China, Europe, Textiles, Trade Shocks, Manufacturing
    JEL: F14 F13 L25 L60
    Date: 2019–05
  4. By: Hovhannisyan, Nune; Keller, Wolfgang
    Abstract: Access to new foreign technology is often central to countries' development strategies. However, we know very little about the quantitative impact of technology sourcing. In this paper, we study the role of outward international business travel for technology sourcing and innovation by examining whether patenting in European regions is affected by the number of business travelers heading to the United States. Using European regional patent data for the years 1996 to 2010 from Eurostat and information on incoming business travelers from the U.S. Department of Commerce's Survey of International Air Traveler, we find that controlling for a region's R&D spending and size, innovation is increasing in the number of business travelers of the region to the United States. Technology sourcing through in-person business travel is not only statistically but economically significant accounting, for example, it accounts for 20% of the higher patenting in Germany's Greater Stuttgart area, compared to Portugal's Algarve region.
    Keywords: European Regions; Innovation; patenting; R&D
    JEL: F2 O22
    Date: 2019–05
  5. By: Lewandowski, Piotr (Institute for Structural Research (IBS)); Park, Albert (Hong Kong University of Science & Technology); Hardy, Wojciech (Institute for Structural Research (IBS)); Yang, Du (Chinese Academy of Social Sciences)
    Abstract: The shift away from manual and routine cognitive work, and towards non-routine cognitive work is a key feature of labor markets. There is no evidence, however, if the relative importance of various tasks differs between workers performing seemingly similar jobs in different countries. We develop worker-level, survey-based measures of task content of jobs – non-routine cognitive analytical and personal, routine cognitive and manual – that are consistent with widely-used occupation-specific measures based on O*NET database. We apply them to representative surveys conducted in 42 countries at different stages of development. We find substantial crosscountry differences in the content of work within occupations. Routine task intensity (RTI) of jobs decreases significantly with GDP per capita for high-skill occupations but not for middle- and low-skill occupations. We estimate the determinants of workers’ RTI as a function of technology (computer use), globalization (specialization in global value chains), structural change, and supply of skills, and decompose their role in accounting for the variation in RTI across countries. Computer use, better education, and higher literacy skills are related to lower RTI. Globalization (as measured by sector foreign value-added share) increases RTI in poorer countries but reduces RTI in richer countries. Differences in technology endowments and in skills’ supply matter most for cross-country differences in RTI, with globalization also important. Technology contributes the most to the differences in RTI among workers in high-skilled occupations and non-off-shorable occupations; globalization contributes the most to differences among workers in low-skilled occupations and offshorable occupations.
    Keywords: task content of jobs, deroutinisation, global division of labor, PIAAC, STEP, CULS
    JEL: J21 J23 J24
    Date: 2019–05
  6. By: Antonio Vezzani (European Commission - JRC); Petros Gkotsis (European Commission - JRC); Hector Hernandez (European Commission - JRC); Pietro Moncada Paterno Castello (European Commission - JRC)
    Abstract: In many EU countries, a high proportion of local inventions are owned by foreign companies. On the contrary, in few countries the number of patents owned is much higher than the local inventions. Companies from Germany and the US are the most frequent foreign owners of patents invented in EU countries. Concentration of patents across companies changes largely from one country to the other. Differences between local inventions and patent ownership, as well as their concentration within countries matter for Innovation policies aiming at closing the EU gap of knowledge creation and technology diffusion.
    Keywords: patents, inventor, ownership, technological innovation, innovation policy, industrial policy
    Date: 2019–04
  7. By: Kozo Kiyota (Keio Economic Observatory, Keio University); Yoshinori Kurokawa (Faculty of Humanities and Social Sciences, University of Tsukuba)
    Abstract: With the growing importance of intermediate goods, recent studies begin to suggest intermediate goods-skill complementarity and its potential effect on inequality. However, this possible complementarity has not yet been formally tested. This paper conducts a formal test on whether intermediate goods are complements for skilled labor. Using the panel data of 40 countries over the period 1995-2009, we estimate a two-level CES production function. Our results indicate that, at the aggregated one-sector level, the elasticity of substitution between intermediate goods and unskilled labor is significantly greater than that between intermediate goods and skilled labor. This confirms intermediate goods-skill complementarity. At the more disaggregated level, such complementarity is observed mainly in the heavy manufacturing industries and the service sector, whereas substitutability is confirmed in the primary sector and in light manufacturing industries. Moreover, intermediate goods-skill complementarity tends to be higher for industries whose shares of imported intermediate goods are higher.
    Keywords: Intermediate goods-skill complementarity, Elasticity of substitution, CES, Skill-biased technological change, Imported intermediate goods
    JEL: E23 O47 J31
    Date: 2019–04–25
  8. By: Giulia Faggio; Olmo Silva; William C. Strange
    Abstract: This paper considers the heterogeneous microfoundations of agglomeration economies. It studies the co-location of industries to look for evidence of labor pooling, input sharing, and knowledge spillovers. The novel contribution of the paper is that it estimates single-industry models using a common empirical framework that exploits the cross-sectional variation in how one industry co-locates with the other industries in the economy. This unified approach yields evidence on the relative importance of the Marshallian microfoundations at the single-industry level, allowing for like-for-like cross-industry comparisons on the determinants of agglomeration. Using UK data, we estimate such microfoundations models for 97 manufacturing sectors, including the classic agglomeration cases of automobiles, computers, cutlery, and textiles. These four cases - as with all of the individual industry models we estimate - clearly show the importance of the Marshallian forces. However, they also highlight how the importance of these forces varies across industries - implying that extrapolation from cases should be viewed with caution. The paper concludes with an investigation of the pattern of heterogeneity. The degree of an industry's clustering (localization), dynamism, incumbent firm size, and worker education are shown to contribute to the pattern of heterogeneous microfoundations.
    Keywords: agglomeration, microfoundations, heterogeneity, industrial clusters
    JEL: R10 R12 L52 L60
    Date: 2019–05
  9. By: Foerster, Andrew (Federal Reserve Bank of San Francisco); Hornstein, Andreas (Federal Reserve Bank of Richmond); Sarte, Pierre-Daniel G. (Federal Reserve Bank of Richmond); Watson, Mark W. (Princeton University)
    Abstract: We fi nd disparate trend variation in TFP and labor growth across major U.S. production sectors over the post-WWII period. When aggregated, these sector-specif c trends imply secular declines in the growth rate of aggregate labor and TFP. We embed this sectoral trend variation into a dynamic multi-sector framework in which materials and capital used in each sector are produced by other sectors. The presence of capital induces important network effects from production linkages that amplify the consequences of changing sectoral trends on GDP growth. Thus, in some sectors, changes in TFP and labor growth lead to changes in GDP growth that may be as large as three times these sectors' share in the economy. We find that trend GDP growth has declined by more than 2 percentage points since 1950, and that this decline has been primarily shaped by sector-specifi c rather than aggregate factors. Sustained contractions in growth specifi c to Construction, Nondurable Goods, and Professional and Business and Services make up close to sixty percent of the estimated trend decrease in GDP growth. In addition, the slow process of capital accumulation means that structural changes have endogenously persistent effects. We estimate that trend GDP growth will continue to decline for the next 10 years absent persistent increases in TFP and labor growth.
    Date: 2019–05–14
  10. By: Elton Beqiraj (Department of Economics and Law, Sapienza University of Rome (IT).); Lucrezia Fanti (National Institute for Public Policy Analysis (INAPP).); Luca Zamparelli (Department of Economics and Law, Sapienza University of Rome (IT).)
    Abstract: This paper looks at structural change as one additional source of decline in the wage share. First, we provide a decomposition of changes in aggregate wage shares into changes due to variations in output composition and in sectoral wage shares for nine OECD countries between 1977 and 2010. We show that the rise in the service sector is a relevant factor in explaining the fall of the wage share, at least for some countries. Next, we develop a two-sector Kaleckian growth model consisting of the service and manufacturing sectors. We assume that structural change is exogenous as it arises from a shift in consumers' preferences or in the saving rate. We show that, when mark-ups are relatively higher in the service sector, a shift in the sectoral composition of demand in favor of the service sector good generates a rise in the profit share.
    Keywords: structural change, functional income distribution, manufacturing, service.
    JEL: D33 E11 O14
    Date: 2019–05
  11. By: Colin Davis; Ken-ichi Hashimoto
    Abstract: In recent years firms have started to offshore their innovation activities to emerging economies. This paper investigates the implications of innovation offshoring for productivity growth in a two-country framework that features a tension between access to technical knowledge and low-cost high-skilled labor in the innovation location decision. Industry and innovation tend to concentrate in the asset-wealthy country when trade costs are relatively high. A positive relationship between innovation costs and industry concentration then ensures that improved international knowledge diffusion coincides with an increase in net offshoring flows in innovation from the asset-wealthy country to the asset-poor country, and potentially with faster productivity growth.
    Date: 2019–05
  12. By: Emil Mihaylov (Vrije Universiteit Amsterdam); Kea Tijdens (Universiteit van Amsterdam)
    Abstract: This paper develops new measures of the task content of occupations that are based on the International Standard Classification of Occupations 2008 (ISCO-08). Using a detailed set of 3,264 occupation-specific tasks, we construct five measures of non-routine analytic, non-routine interactive, routine cognitive, routine manual and non-routine manual tasks for 427 four-digit occupations. To generate these measures, first we assign each of the 3,264 tasks to one or more of the five task categories. The decision to classify tasks as routine or non-routine, and as cognitive or manual, depends on whether the tasks can be replaced by computer-controlled technology and whether the performance of the tasks requires cognitive or manual skills. We judge the automation potential of tasks on a case-by-case basis and classify tasks to one or more of the five task categories. Because the classification of 3,264 tasks can be prone to errors, we devote substantial attention to the possibility of misclassifying tasks. We discuss three particular types of task misclassifications and provide examples of tasks that could be potentially misclassified. In line with the previous literature, we find that non-routine analytic and interactive tasks are most prevalent in the work of Managers and Professionals, routine cognitive tasks are mainly concentrated in the work of Clerical Support Workers, and routine and non-routine manual tasks are most common in the work of Plant and Machine Operators and Assemblers and Elementary Occupations, respectively. We compare the newly developed task measures with three previous studies (Acemoglu and Autor, 2011; Dengler, Matthes and Paulus, 2014; Frey and Osborne, 2017) and demonstrate that our measures are moderately to strongly positively correlated with the previous papers’ indexes. Based on our task content measures, we provide an end of the envelop estimation of the number of occupations that might be at risk of automation. We find that approximately 16 percent of the 427 ISCO-08 occupations fall into the so-called high risk of automation category – they contain 70 percent or more routine tasks. The 16 percent of automatable occupations correspond roughly to 11 percent of total employment in the Netherlands.
    Keywords: Technological change, Computerization, Occupations, Routine and non-routine tasks, International Standard Classification of Occupations 2008 (ISCO-08)
    JEL: O33 J24 J62
    Date: 2019–05–17
  13. By: Nordin, Martin (Department of Economics, Lund University); Grenestam , Erik (Department of Economics, Lund University); Gullstrand , Joakim (Department of Economics, Lund University)
    Abstract: This study investigates the relationship between super-fast broadband and firms’ sales and employment level in Sweden. It is important to learn more about this recent technological change and few studies has explored the impact of super-fast broadband on firm outcomes. We use the previous roll-out of second-generation internet access to identify the effect of third-generation internet access. The early investments in optic fiber where largely core broadband network investments paving the way for later investments in third-generation broadband technology. Municipalities choosing providers who prioritized cheap technology (broadband over telephone lines, DSL) targeting the many, thus fell behind municipalities choosing providers investing in optic fiber. We find heterogeneity in the broadband effect, but the overall effect is negative. This effect may be associated with the roll-out of 4G mobile broadband in 2011; mobile broadband services are a byproduct of optic fiber because mobile broadband is transmitted from the same high capacity fiber-optic base stations. We suggest that the negative effect found is related to internet use at work and the mixing of private and work related internet use.
    Keywords: broadband; optic fiber; firm output; employment; regional analysis
    JEL: D22 J23 O30 R50
    Date: 2019–05–13
  14. By: Bailey, Michael; Johnston, Drew; Kuchler, Theresa; Ströbel, Johannes; Wong, Arlene
    Abstract: We study the nature of peer effects in the market for new cell phones. Our analysis builds on de-identified data from Facebook that combine information on social networks with information on users' cell phone models. To identify peer effects, we use variation in friends' new phone acquisitions resulting from random phone losses and carrier-specific contract terms. A new phone purchase by a friend has a substantial positive and long-term effect on an individual's own demand for phones of the same brand, most of which is concentrated on the particular model purchased by the friend. We provide evidence that social learning contributes substantially to the observed peer effects. While peer effects increase the overall demand for cell phones, a friend's purchase of a new phone of a particular brand can reduce individuals' own demand for phones from competing brands---in particular those running on a different operating system. We discuss the implications of these findings for the nature of firm competition. We also find that stronger peer effects are exerted by more price-sensitive individuals. This positive correlation suggests that the elasticity of aggregate demand is substantially larger than the elasticity of individual demand. Through this channel, peer effects reduce firms' markups and, in many models, contribute to higher consumer surplus and more efficient resource allocation.
    Keywords: Demand Spillovers; peer effects; Social learning
    JEL: D4 L1 L2 M3
    Date: 2019–05

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