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on Technology and Industrial Dynamics |
| By: | Myeongwan Kim |
| Abstract: | A key economic issue in Canada is the declining Business Enterprise Research and Development in manufacturing since the early 2000s. Accompanying this, the total factor productivity (TFP) growth in manufacturing slowed after 2000. However, there has not been a definitive explanation for these trends. To deepen our understanding of this phenomenon, we focus on the increasing Chinese import share in the total domestic absorption in Canadian manufacturing since the early 2000s, which appears to be driven by positive supply shocks within Chinese manufacturing. Based on a firm-level database covering all incorporated firms in Canadian manufacturing, we find that rising Chinese import competition led to declines in R&D expenditure and TFP growth within firms but reallocated employment towards more productive firms and induced less productive firms to exit. The negative within-effects were pronounced for firms that were initially smaller, less profitable, and less productive. These firms also experienced declines in their profit margins due to rising Chinese import competition while larger and better-performing firms did not. Our estimates imply that rising Chinese import competition can explain about 7 per cent of the total decline of $1.36 billion (2007 CAD) in R&D expenditure in Canadian manufacturing between 2005 and 2010. Although it led to declines in TFP within firms, the positive reallocation effects more than offset the negative within-effect. Had there been no increase in Chinese import competition between 2005 and 2010, TFP in Canadian manufacturing would have declined by 1.26 per cent per year instead of the actual 1.09 per cent per year over this period. |
| Keywords: | China Shock, Canada, Imports, Productivity, Innovation |
| JEL: | F62 O32 O51 O53 L60 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:1903&r=all |
| By: | Lilas Demmou; Guido Franco; Irina Stefanescu |
| Abstract: | Using a cross-country firm level panel dataset from 1995 to 2015, this paper revisits the finance–productivity nexus by looking at the role of intangible assets. It argues that due to their specific characteristics, such as valuation uncertainty and lower pledgeability, financing the purchase of intangible assets is more difficult than that of tangible assets. As a result, financial frictions are expected to be more binding for productivity growth in sectors where intangibles have become a pivotal component in firms production function. The analysis relies on a panel fixed effects econometric approach, several indices to capture financial frictions at the firm level and a new measure of intangible intensity at the industry level. We provide evidence that financial frictions act as a drag on productivity growth and especially so with respect to firms operating in intangible intensive sectors. These findings, which are robust to alternative specifications, shed light on the role of financial factors in explaining the productivity slowdown in OECD countries and provide support for using intangible intensity as a new dimension to proxy the relative exposure of industries to financing frictions. |
| Keywords: | financial constraints, intangible assets, productivity |
| JEL: | D22 D24 G31 O33 |
| Date: | 2020–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1596-en&r=all |
| By: | Thomas Geelen (Copenhagen Business School - Department of Finance; Danish Finance Institute); Jakub Hajda (University of Lausanne; Swiss Finance Institute); Erwan Morellec (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute) |
| Abstract: | Recent empirical studies show that innovative firms heavily rely on debt financing. This paper investigates the relation between debt financing, innovation, and growth in a Schumpeterian growth model in which firms' dynamic R&D and financing choices are jointly and endogenously determined. The paper demonstrates that while debt hampers innovation by incumbents due to debt overhang, it also stimulates entry, thereby fostering innovation and growth at the aggregate level. The paper also shows that debt financing has large effects on firm entry, firm turnover, and industry structure and evolution. Lastly, it predicts substantial intra-industry variation in leverage and innovation, in line with the empirical evidence.. |
| Keywords: | debt, innovation, industry dynamics, growth |
| JEL: | G32 O30 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1979&r=all |
| By: | Lucas Figal Garone (IDB); Paula A. López Villalba (Universidad de San Andrés); Alessandro Maffioli (IDB); Christian A. Ruzzier (Universidad de San Andrés) |
| Abstract: | While the accumulation of factors of production, both physical and human capital, has helped Latin America and the Caribbean (LAC) to narrow the income gap with developed economies, aggregate productivity is still relatively low. Although there are numerous determinants of aggregate productivity, it is largely based on the underlying productivity of all firms in the economy. Using firm-level data from several waves of the World Bank Enterprise Survey and Chile’s National Manufacturing Survey, we explore the ‘what’ question on productivity dispersion in LAC. We document three stylized facts: (i) there are significant differences in firm productivity within industries – the firm at the 90th percentile of the productivity distribution produces almost seven times as much output (using the same measured inputs) as the 10th percentile firm; (ii) productivity differences persist over time – regressing a firm’s current productivity on its one-year lagged productivity yields an autoregressive coefficient of around 0.9; and (iii) most of the growth in aggregate productivity comes from improvements in the productivity of existing firms. Next, we discuss the factors that explain these persistent productivity differences – the ‘why’ question. We argue that the large productivity differences within industries can be traced back to differences in firm strategy and organization (internal factors), and in the environment in which firms operate (external factors). Finally, we review the existing empirical evidence on the impacts of these factors on firm-level productivity (with a focus on developing countries) and identify knowledge gaps and opportunities for public, private and institutional investments. |
| Keywords: | Aggregate productivity, firm-level productivity, TFP, Latin America and the Caribbean |
| JEL: | D24 L20 M20 O30 O47 O54 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:sad:wpaper:136&r=all |
| By: | Myeongwan Kim, John Lester |
| Abstract: | Business investment in research and development (R&D) makes a key contribution to rising living standards. Firms undertaking the R&D can reduce production costs and introduce new products that provide benefits to consumers that are not fully captured in selling prices. Further, it is very difficult for R&D-performing firms to prevent some of the knowledge created from leaking out or spilling over to other firms. Since firms do not take these positive spillover benefits into consideration when making investment decisions, most governments subsidize business investment in R&D with the expectation that economic performance will improve as a result. Our study confirms the existence of substantial spillover benefits from R&D performed in Canada, so government support for R&D is justified. However, we do not find any empirical evidence to support the current policy of subsidizing R&D at a higher rate when it is performed by small firms than when it is performed by large firms. We also find much lower private rate of return on R&D performed by small firms than by large firms. Subsidies appear to be playing a key role in this result |
| JEL: | O32 D22 D24 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:1902&r=all |
| By: | Krenz, Astrid; Prettner, Klaus; Strulik, Holger |
| Abstract: | We propose a theoretical framework to analyze the offshoring and reshoring decisions of firms in the age of automation. Our theory suggests that increasing productivity in automation leads to a relocation of previously offshored production back to the home economy but without improving low-skilled wages and without creating jobs for low-skilled workers. Since it leads also to increasing wages for high-skilled workers, automation-induced reshoring is associated with an increasing skill premium and increasing inequality. We develop a measure for reshoring activity at the macro-level and, using data from the world input output table, we provide evidence for automation-driven reshoring. On average, within manufacturing sectors, an increase by one robot per 1000 workers is associated with a 3.5% increase of reshoring activity. Using robots in countries with similar sectoral structure as an instrument, we find that an increase by one robot per 1000 workers causes a 2.5% increase of reshoring activity. We also provide the first cross-country evidence that reshoring is positively associated with wages and employment for high-skilled labor but not for low-skilled labor and that tariffs increase the degree of reshoring. |
| Keywords: | Automation,Reshoring,Employment,Wages,Inequality,Tariffs |
| JEL: | F13 F62 J31 O33 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:443&r=all |
| By: | Serguey Braguinsky; Atsushi Ohyama; Tetsuji Okazaki; Chad Syverson |
| Abstract: | We explore how firms grow by adding products. In contrast to most earlier work on the topic, our conceptual and empirical framework allows for separate treatment of product innovation (vertical differentiation) and diversification (horizontal differentiation). The market context is Japan’s cotton spinning industry at the turn of the last century. We find that introducing innovative products outside of the previously feasible set involves removing the “supply-side constraint” by investing in new types of machines and technologies. This process involves a high degree of uncertainty, however, so firms that take steps in this direction tend to first introduce innovative products on experimental basis. We show that conducting such experiments is a key to firm growth. It not only provides opportunities to capture the market in high-end vertically differentiated products when successful, but also facilitates horizontal differentiation of the firm’s products within its previous technical capabilities. In long-term outcomes over 20 years, the right tail of the firm size distribution becomes dominated by firms that were able to expand in both directions: moving first into technologically challenging vertically differentiated products, and then later applying their newly acquired high-end technical competence to horizontal expansion of their product portfolios. |
| JEL: | D2 L1 N6 N8 O3 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26665&r=all |
| By: | Krüger, Miriam; Kinne, Jan; Lenz, David; Resch, Bernd |
| Abstract: | In this paper, we introduce the concept of a Digital Layer to empirically investigate inter-firm relations at any geographical scale of analysis. The Digital Layer is created from large-scale, structured web scraping of firm websites, their textual content and the hyperlinks among them. Using text-based machine learning models, we show that this Digital Layer can be used to derive meaningful characteristics for the over seven million firm-to-firm relations, which we analyze in this case study of 500,000 firms based in Germany. Among others, we explore three dimensions of relational proximity: (1) Cognitive proximity is measured by the similarity between firms' website texts. (2) Organizational proximity is measured by classifying the nature of the firms' relationships (business vs. non-business) using a text-based machine learning classification model. (3) Geographical proximity is calculated using the exact geographic location of the firms. Finally, we use these variables to explore the differences between innovative and non-innovative firms with regard to their location and relations within the Digital Layer. The firm-level innovation indicators in this study come from traditional sources (survey and patent data) and from a novel deep learning-based approach that harnesses firm website texts. We find that, after controlling for a range of firm-level characteristics, innovative firms compared to non-innovative firms maintain more numerous relationships and that their partners are more innovative than partners of non-innovative firms. Innovative firms are located in dense areas and still maintain relationships that are geographically farther away. Their partners share a common knowledge base and their relationships are business-focused. We conclude that the Digital Layer is a suitable and highly cost-efficient method to conduct large-scale analyses of firm networks that are not constrained to specific sectors, regions, or a particular geographical level of analysis. As such, our approach complements other relational datasets like patents or survey data nicely. |
| Keywords: | Web Mining,Innovation,Proximity,Network,Natural Language Processing |
| JEL: | O30 R10 C80 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20003&r=all |
| By: | Daron Acemoglu; Pascual Restrepo |
| Abstract: | The standard approach to modeling inequality, building on Tinbergen's seminal work, assumes factor-augmenting technologies and technological change biased in favor of skilled workers. Though this approach has been successful in conceptualizing and documenting the race between technology and education, it is restrictive in a number of crucial respects. First, it predicts that technological improvements should increase the real wages of all workers. Second, it requires sizable productivity growth to account for realistic changes in relative wages. Third, it is silent on changes in job and task composition. We extend this framework by modeling the allocation of tasks to factors and allowing richer forms of technological changes in particular, automation that displaces workers from tasks they used to perform, and the creation of new tasks that reinstate workers into the production process. We show that factor prices depend on the set of tasks that factors perform, and that automation: (i) powerfully impacts inequality; (ii) can reduce real wages; and (iii) can generate realistic changes in inequality with small changes in productivity. New tasks, on the other hand, can increase or reduce inequality depending on whether it is skilled or unskilled workers that have a comparative advantage in these new activities. Using industry-level estimates of displacement driven by automation and reinstatement due to new tasks, we show that displacement is associated with significant increases in industry demand for skills both before 1987 and after 1987, while reinstatement reduced the demand for skills before 1987, but generated higher demand for skills after 1987. The combined effects of displacement and reinstatement after 1987 explain a significant part of the shift towards greater demand for skills in the US economy. |
| JEL: | J23 J24 J31 O33 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26681&r=all |
| By: | Debraj Ray ⓡ; Dilip Mookherjee |
| Abstract: | We provide an argument for long-term automation and decline in the labor income share, driven by capital accumulation rather than technical progress or rising markups. We emphasize a fundamental asymmetry across physical and human capital. An individual can indefinitely replicate her claims on the former, but — after a point — her human endowment cannot be cloned and rescaled in the same way. Then ongoing capital accumulation gives rise to progressive automation, and the share of labor income converges to zero. The displacement of human labor is gradual, and real wages could rise indefinitely. The results extend to endogenous technical change. |
| JEL: | D33 E25 J24 J31 O33 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26658&r=all |
| By: | Francesco Biancalani; Dirk Czarnitzki; Massimo Riccaboni |
| Abstract: | Using a difference-in-difference approach this paper analyses the impact of the Italian Startup Act entered into force in December 2012. This law provides special benefits (e.g. tax incentives, public loan guarantees, tailor-made labor law, cuts to red tape and fees) for firms registered as “innovative startups” in Italy. This special legislation has been implemented by the Italian government to increase innovativeness of small and young enterprises by facilitating improved access to external capital and (high-skilled) labor. Consequently, our goal is to assess the impact of the policy on equity, debt and employment. Overall, we find that the Italian startup policy has met its primary objectives. The treated firms operating under this program show more capacity to collect equity and debt, and also achieve higher levels of employment than untreated, comparable firms. |
| Keywords: | start up, innovation policy, firm subsidies, small firms |
| Date: | 2020–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:ete:msiper:648452&r=all |
| By: | Omar Rachedi (Banco de España) |
| Abstract: | This paper studies how the variation in sectoral productivities shapes the sectoral composition of the Spanish economy from 1980 to 2015. I first document an asymmetric behavior of sectoral productivities: the productivity of services declines over time, whereas the productivity of manufacturing increases until the 1990s, before slowing down. I feed the path of sectoral productivities observed in the data into a model of structural transformation with two sectors (services and manufacturing) which are connected by an Input-Output matrix. The model reproduces the variation of the gross output services share of the Spanish economy between 1980 and 2015. The model implies that – even absent changes in the trends of sectoral productivities – the annual growth rate of GDP between 2015 and 2050 shrinks by 0.6 percentage points with respect to the average growth rate between 1980 and 2015. Hence, annual GDP growth would decline from 2.3% to 1.7%. If sectoral productivities were to equal the levels observed in the Euro Area between 1980 and 2015, the average growth rate of Spanish GDP between 2015 and 2050 would be 2.1%. |
| Keywords: | sectoral analysis, Input-Output matrix, Spanish economy |
| JEL: | O11 O14 O4 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:2003&r=all |
| By: | Miana Plesca (Department of Economics and Finance, University of Guelph, Canada; Rimini Centre for Economic Analysis); Fraser Summerfield (Department of Economics, St. Francis Xavier University, Canada; Rimini Centre for Economic Analysis) |
| Abstract: | This paper uses Canadian data to examine the link between worker-job mismatch and productivity. We measure mismatch by comparing worker education to occupational skill requirements in the Labour Force Survey (LFS) merged with industrial aggregates of a labor productivity index for the period 1997Q1-2014Q1. Economy-wide mismatch shares appear to have little importance for productivity. Instead, we show that the consequences of mismatch for aggregate productivity depend on precisely which type of workers and which types of jobs are mismatched. Productivity is dampened most when university educated workers are employed in occupations generally requiring community-college or high school education, thus leaving human capital idle. |
| Keywords: | productivity, mismatch, overeducation, skill |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:20-02&r=all |
| By: | Mario Coccia |
| Abstract: | Political systems shape institutions and govern institutional change supporting economic performance, production and diffusion of technological innovation. This study shows, using global data of countries, that institutional change, based on a progressive democratization of countries, is a driving force of inventions, adoption and diffusion of innovations in society. The relation between technological innovation and level of democracy can be explained with following factors: higher economic freedom in society, effective regulation, higher economic and political stability, higher investments in R&D and higher education, good economic governance and higher level of education system for training high-skilled human resources. Overall, then, the positive associations between institutional change, based on a process of democratization, and paths of technological innovation can sustain best practices of political economy for the development of economies in the presence of globalization and geographical expansion of markets. |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2001.08432&r=all |
| By: | Tsakanikas, Aggelos; Roth, Felix; Caliò, Simone; Caloghirou, Yannis; Dimas, Petros |
| Abstract: | This paper analyzes the contribution of intangible inputs and participation in global value chains (GVCs) to the productivity performance of an EU-28 country sample over the time frame 2000-2014. Utilizing new data from the GLOBALINTO Input-Output Intangibles database, this paper finds a positive relationship between a country's intangible inputs and its productivity performance once the interaction between intangible inputs and the participation in Global Value Chains is taken into account. This effect is stronger in the subset of 19 euro area countries. The results clarify that national and European policymakers should ensure the mechanisms, the tools and the legislative framework that will support sufficient production and development of intangible inputs by investing in public intangibles, such as the quantity and quality of a highly-skilled labour force and well-functioning formal and informal institutions that could lead to the further growth of intangibles. Furthermore, the need for a unified EU intangibles policy framework arises, in which common guidelines align national agendas in order to address the relevant gaps in intangibles industrial policy. |
| Keywords: | Intangibles,Global Value Chain,Productivity Performance,European Union,Euro Area |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:uhhhdp:5&r=all |