nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2020‒05‒18
ten papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Public policies and the art of catching up: matching the historical evidence with a multi-country agent-based model By Giovanni Dosi; Andrea Roventini; Emanuele Russo
  2. Taxation and Innovation: What Do We Know? By Ufuk Akcigit; Stefanie Stantcheva
  3. Knowledge-Based Capital and Productivity Divergence By Marie Le Mouel; Alexander Schiersch
  4. Varieties of deindustrialization and patterns of diversification: why microchips are not potato chips By Giovanni Dosi; Federico Riccio; Maria Enrica Virgillito
  5. Do Vertical Spillovers Differ by Investors' Productivity? Theory and Evidence from Vietnam By Ni, Bin; Kato, Hayato
  6. Not so disruptive yet? Characteristics, distribution and determinants of robots in Europe By Enrique Fernandez-Macias; David Klenert; Jose-Ignacio Anton
  7. Levels of structural change: An analysis of China's development push 1998-2014 By Heinrich, Torsten; Yang, Jangho; Dai, Shuanping
  8. Productivity, structural change, and skills dynamics: Evidence from a half-century analysis By Gunes Asik; Ulas Karakoc; Mohamed Ali Marouani; Michelle Marshalian
  9. Payroll Share, Real Wage and Labor Productivity across US States By Ivan Mendieta-Muñoz; Codrina Rada; Ansel Schiavone; Rudi von Arnim
  10. Firm-level Expectations and Behavior in Response to the COVID-19 Crisis By Buchheim, Lukas; Dovern, Jonas; Krolage, Carla; Link, Sebastian

  1. By: Giovanni Dosi; Andrea Roventini; Emanuele Russo
    Abstract: In this paper, we study the effects of industrial policies on international convergence using a multi-country agent-based model which builds upon Dosi et al. (2019b). The model features a group of microfounded economies, with evolving industries, populated by heterogeneous firms that compete in international markets. In each country, technological change is driven by firms' activities of search and innovation, while aggregate demand formation and distribution follows Keynesian dynamics. Interactions among countries take place via trade flows and international technological imitation. We employ the model to assess the different strategies that laggard countries can adopt to catch up with leaders: market-friendly policies; industrial policies targeting the development of firms' capabilities and R&D investments, as well as trade restrictions for infant industry protection; protectionist policies focusing on tariffs only. We find that markets cannot do the magic: in absence of government interventions, laggards will continue to fall behind. On the contrary, industrial policies can successfully drive international convergence among leaders and laggards, while protectionism alone is not necessary to support catching up and countries get stuck in a sort of middle-income trap. Finally, in a global trade war, where developed economies impose retaliatory tariffs, both laggards and leaders are worse off and world productivity growth slows down.
    Keywords: Endogenous growth; catching up; technology-gaps; industrial policies; agent-based models.
    Date: 2020–05–08
  2. By: Ufuk Akcigit; Stefanie Stantcheva
    Abstract: Tax policies are a wide array of tools, commonly used by governments to influence the economy. In this paper, we review the many margins through which tax policies can affect innovation, the main driver of economic growth in the long-run. These margins include the impact of tax policy on i) the quantity and quality of innovation; ii) the geographic mobility of innovation and inventors across U.S. states and countries; iii) the declining business dynamism in the U.S., firm entry, and productivity; iv) the quality composition of firms, inventors, and teams; and v) the direction of research effort, e.g., toward applied versus basic research, or toward dirty versus clean technologies. We give ideas drawn from research on how the design of policy can allow policy makers to foster the most productive firms without wasting public funds on less productive ones.
    JEL: H21 H23 H25 O31 O33 O34 O38
    Date: 2020–05
  3. By: Marie Le Mouel; Alexander Schiersch
    Abstract: Understanding the causes of the slowdown in aggregate productivity growth is key to maintaining the competitiveness of advanced economies and ensuring long-term economic prosperity. This paper is the first to provide evidence that investment in Knowledge-Based Capital (KBC), despite having a positive effect on productivity at the micro level, is a driver of the weak productivity performance at the aggregate level, by accentuating divergence between a group of “frontier” firms and the rest of the economy. Using detailed firm-level administrative data for Germany, we find evidence that the effect of KBC on productivity is heterogeneous across firms within industries: this effect is 3 times larger for firms in the top quintile of the KBC distribution compared to firms in the bottom quintile of the KBC distribution. We document the existence of divergence in productivity growth between top KBC users and the rest of firms at the industry level, and find that industries where this gap is larger are also those industries where the heterogeneity in the effect of KBC is highest and where average productivity growth was lower. The evidence hence supports the view that the use of KBC plays a role in explaining weak productivity growth, by accentuating differences between firms.
    Keywords: Knowledge-Based Capital, firm dynamics, productivity divergence
    JEL: D24 L25 O14 O30 O47
    Date: 2020
  4. By: Giovanni Dosi; Federico Riccio; Maria Enrica Virgillito
    Abstract: Contrarily to the notion of a natural tendency of deindustrialization, this paper, documenting the existence of a variety of patterns of deindustrialization, performs a cross-country, long-term analysis. Looking at industrial sectors and their technological characteristics, categorised on the ground of the Pavitt (1984) taxonomy, we do find a markedly uneven process of deindustrialization with Science Based and Specialised Suppliers not presenting any inverted U-shaped pattern, neither in employment nor in value added. The heterogeneity holds both for the four Pavitt aggregates and under further disaggregation at industry level. We then study whether the uneven sectoral composition might have exerted an impact on the timing of deindustrialization. Overall, our analysis brings support to the notion that "microchips" are not "potato chips" in their influence on the patterns of long-term economic development of different countries. Moreover, during the phase of globalisation the probability for low-income countries to be stuck to produce "potato chips" has increased and that of transition toward the production of "microchips" has been reducing.
    Keywords: Deindustrialization; Structural Change; Diversification; Technological Change.
    Date: 2020–05–13
  5. By: Ni, Bin; Kato, Hayato
    Abstract: Developing countries are eager to host foreign direct investment to receive positive technology spillovers to their local firms. However, what types of foreign firms are desirable for the host country to achieve spillovers best? We address this question using firm-level panel data from Vietnam to investigate whether foreign Asian investors in downstream sectors with different productivity affects the productivity of local Vietnamese firms in upstream sectors differently. Using endogenous structural breaks, we divide Asian investors into low-, middle-, and high-productivity groups. The results suggest that the presence of the middle group has the strongest positive spillover effect. The differential spillover effects can be explained by a simple model with vertical linkages and productivity-enhancing investment by local suppliers. The theoretical mechanism is also empirically confirmed.
    Keywords: FDI spillovers; Heterogeneous productivity; Firm-level data; Endogenous structural break; Vertical Cournot model
    JEL: D22 F21
    Date: 2020–03–27
  6. By: Enrique Fernandez-Macias (European Commission - JRC); David Klenert (European Commission – JRC); Jose-Ignacio Anton (University of Salamanca, Spain)
    Abstract: This paper analyses data on industrial robots in European manufacturing sectors, focusing on their applications and characteristics, their distribution over countries and sectors and the main factors that are correlated with robot adoption such as wage levels and robot prices. We argue that, contrary to popular belief, the types of robots widely used in manufacturing today do not imply a discontinuity in terms of automation and labour replacement possibilities. Instead, current robot technology is better understood as the most recent iteration of industrial automation technologies that have existed for a very long time. In fact, these automation technologies arguably had their biggest employment impact generations ago, partially explaining changes in employment structures in agricultural and manufacturing sectors that go back to the Industrial Revolution. Thus, the potential employment effects of current robot technology are a priori limited.
    Keywords: Robots, jobs, employment, low-skilled workers, inequality, European Union, economic activities
    Date: 2020–04
  7. By: Heinrich, Torsten; Yang, Jangho; Dai, Shuanping
    Abstract: We investigate structural change in the PR China during a period of particularly rapid growth 1998-2014. For this, we utilize sectoral data from the World Input-Output Database and firm-level data from the Chinese Industrial Enterprise Database. Starting with correlation laws known from the literature (Fabricant's laws), we investigate which empirical regularities hold at the sectoral level and show that many of these correlations cannot be recovered at the firm level. For a more detailed analysis, we propose a multi-level framework, which is validated with empirically. For this, we perform a robust regression, since various input variables at the firm-level as well as the residuals of exploratory OLS regressions are found to be heavy-tailed. We conclude that Fabricant's laws and other regularities are primarily characteristics of the sectoral level which rely on aspects like infrastructure, technology level, innovation capabilities, and the knowledge base of the relevant labor force. We illustrate our analysis by showing the development of some of the larger sectors in detail and offer some policy implications in the context of development economics, evolutionary economics, and industrial organization.
    Keywords: Structural change; Fabricant's laws; China; labor productivity; economic growth; firm growth
    JEL: L11 L16 O10 O30 O53
    Date: 2020–05–04
  8. By: Gunes Asik; Ulas Karakoc; Mohamed Ali Marouani; Michelle Marshalian
    Abstract: This paper explores the contribution of structural change and the skill upgrading of the labour force to productivity. Our growth decomposition based on an original database we built for Tunisia and Turkey shows that productivity is mainly explained by intra-industry changes during the import substitution period. Second, we show that this productivity increase has been driven by the reallocation of higher-educated labour between sectors rather than the absorption of highly educated workers within sectors.
    Keywords: MENA, Productivity, Skills, structural change, Tunisia, Turkey
    Date: 2020
  9. By: Ivan Mendieta-Muñoz (University of Utah); Codrina Rada (University of Utah); Ansel Schiavone (University of Utah); Rudi von Arnim (University of Utah)
    Abstract: This paper analyzes regional contributions to the US payroll share from 1977 to 2017 and the four major business cycles throughout this period. We implement two empirical exercises. First, we decompose the US payroll share across states. Utilizing a Divisia index decomposition technique yields exact contributions of real wages, employment structure, labor productivity and relative prices across the states to the aggregate change in the payroll share. Key findings are that the decline in the aggregate (i) is driven by decoupling between real wage and labor productivity; and (ii) is initially driven by the rust belt states, but subsequently dominated by relatively large states. Second, we employ mixture models on real wages and labor productivity across US states to discern whether distinct mechanisms appear to generate these distributions. Univariate models (iii) indicate the possibility that two distinct mechanisms generate state labor productivities, raising the question of whether regional dualism has taken hold. Lastly, we use bivariate mixture models to investigate whether such dualism and decoupling manifest in the joint distributions of payroll shares and labor productivity, too. Results (iv) are affirmative, and further suggest a tendency for high performing states to have relatively high payroll shares initially, and low payroll shares more recently.
    Keywords: labor share; US states; Divisia decomposition; mixture models
    JEL: D33 C43 O41 O5
    Date: 2020–04
  10. By: Buchheim, Lukas (University of Munich); Dovern, Jonas (University of Erlangen-Nuremberg); Krolage, Carla (Ifo Institute for Economic Research); Link, Sebastian (Ifo Institute for Economic Research)
    Abstract: This paper studies the determinants of firms' business outlook and managerial mitigation strategies in the wake of the COVID-19 crisis using a representative panel of German firms. We first demonstrate that the crisis amplifies pre-crisis weaknesses: Firms that appear relatively weak before the crisis are harder hit initially, and, on top of the initial impact, expect more difficulties for their businesses going forward. Consequently, such firms are first to cut employment and investment. Second, our results highlight that expectations regarding the duration of the shutdown—which, at this point of the crisis, exhibit plausibly random variation—are an important determinant of the chosen mitigation strategies: Firms that expect the shutdown to last longer are more likely to lay off workers and to cancel or postpone investment projects.
    Keywords: expectations, firm behavior, COVID-19, shutdown, employment, investment
    JEL: D22 D84 E23
    Date: 2020–05

This nep-tid issue is ©2020 by Fulvio Castellacci. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.