nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2021‒01‒11
twelve papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. The rise of the service sector in the global economy By Owusu, Solomon; Szirmai, Adam; Foster-McGregor, Neil
  2. LOCATION DETERMINANTS OF ECOINNOVATIVE FIRMS IN FRANCE By Eva Coll-Martinez; Malia Kedjar; Patricia Renou-Maissant
  3. The impact of Covid-19 on productivity By Bloom, Nicholas; Bunn, Philip; Mizen, Paul; Smietanka, Pawel; Thwaites, Gregory
  4. Inter-Industry Spillovers in Labor Productivity and Global Value Chain Impacts: Evidence from Turkey By Mohamedou Nasser Dine
  5. Trademark filings and patent application count time series are structurally near-identical and cointegrated: Implications for studies in innovation By Iraj Daizadeh
  6. Cooperative R&D with Differentiated Products in Vertically Related Industries By Gamal Atallah; Parisa Pourkarimi
  7. Labor Earnings Dispersion in Chile: Decomposition, Dynamics and the Role of Firms By Rosario Aldunate; Gabriela Contreras; Matías Tapia
  8. Fragile, yet resilient: Adaptive decline in a collaboration network of firms By Frank Schweitzer; Giona Casiraghi; Mario V. Tomasello; David Garcia
  9. Take a ride on the green side: How do CDM projects affect Indian manufacturing firms’ environmental performance? By Jaraite, Jurate; Kurtyka , Oliwia; Olliver, Hélène
  10. Drivers of automation and consequences for jobs in engineering services: an agent-based modelling approach By Kyvik Nordås, Hildegunn; Klügl, Franziska
  11. Money, Human Capital and Endogenous Market Structure in a Schumpeterian Economy By He, Qichun; Wang, Xilin
  12. Amundsen versus Scott: Are growth paths related to firm performance? By Coad, Alex; Daunfeldt, Sven-Olov; Halvarsson, Daniel

  1. By: Owusu, Solomon (UNU-MERIT, Maastricht University); Szirmai, Adam (UNU-MERIT); Foster-McGregor, Neil (UNU-MERIT)
    Abstract: The paper takes a two-pronged approach to examine the implications of the rapid rise of the service sector in the economies of the world. First, it analyses tertiarization in the global economy touching on key issues such as Baumol's hypothesis of a stagnant service sector, the contribution of the service sector to aggregate productivity growth, and the potentially positive contributions of services to other sectors. The second half of the paper focuses on tertiarization trends in sub-Saharan Africa, representing the role of the service sector in low-income economies. Using a long series of sectoral employment and output data, IO tables and multiple statistical analysis, we find that perceptions of services as stagnant and productivity resistant do not apply to all service sub-sectors. Productivity growth in modern, dynamic, and tradable services is equal to or higher than that in manufacturing and other sectors. These service sectors are innovative and might act as new or alternative engines of growth alongside manufacturing. The manufacturing sector in Africa still generates the strongest multipliers, including to market services. However, much of the manufacturing linkages are captured by foreign countries. While the multipliers in market services are relatively lower than those of manufacturing, they are comparable to those in many other regions of the world economy and more of the gains are captured by domestic firms which could encourage a self-reinforcing pattern of market service development. We also find robust evidence of strong inter-sectoral linkages between the service sector and manufacturing. Given the sector’s mutually reinforcing interaction with the manufacturing sector, the growing service sector could potentially play a significant complementary role in the prospects for industrialization of Africa. But this potential remains to be realized.
    Keywords: Service Sector, Sub-Saharan Africa, Global Economy, Structural Change, Technological Change, Baumol’s Hypothesis
    JEL: O11 O14 O33 O41 O47 C67 N17
    Date: 2020–12–16
  2. By: Eva Coll-Martinez (Sciences Po, Toulose); Malia Kedjar (Normandie University); Patricia Renou-Maissant (EconomiX, CNRS, University of Paris Nanterre))
    Abstract: This paper analyses the location determinants of eco-innovative firms in France. The analysis is based on a dataset obtained after merging firm-level microdata on the location of new firms from DIANE Mercantil Register (Bureau van Dijk) and patents information from the OECD REGPAT (2018) database for the period 2003 and 2013. This paper departs from previous contributions on the location determinants of eco-innovation in three main ways. First, it analyses the effects of the regional technological knowledge base and its composition focusing on environmental-based innovations. Second, it introduces spatial econometrics techniques to capture any potential spatial spillovers arising from the location of eco-innovative firms. And third, it focuses on the French case which is of special interest in view of the relevance of regional eco-innovation policies. Main results show that unrelated knowledge variety for environmental technologies and the political support in terms of investments for the protection of the environment are the main factors explaining the location of eco-innovative firms. Indeed, by applying spatial econometrics we found that there is a clear spatial dependence on the creation. However, our results also show that the impact of the knowledge composition is quite local. These results may have many implications for French departments’ environmental performance and sustainable growth.
    Keywords: eco-innovative firms’ entry, industrial location, knowledge spillovers, environmental technologies, France
    JEL: L
    Date: 2020
  3. By: Bloom, Nicholas (Stanford University); Bunn, Philip (Bank of England); Mizen, Paul (University of Nottingham); Smietanka, Pawel (Bank of England); Thwaites, Gregory (University of Nottingham)
    Abstract: We analyse the impact of Covid-19 on productivity in the United Kingdom using data derived from a large monthly firm panel survey. Our estimates suggest that Covid-19 will reduce TFP in the private sector by up to 5% in 2020 Q4, falling back to a 1% reduction in the medium term. Firms anticipate a large reduction in ‘within-firm’ productivity, primarily because measures to contain Covid-19 are expected to increase intermediate costs. The negative ‘within-firm’ effect is partially offset by a positive ‘between-firm’ effect as low productivity sectors, and the least productive firms among them, are disproportionately affected by Covid-19 and consequently make a smaller contribution to the economy. In the longer run, productivity growth is likely to be reduced by diminished R&D expenditure and diverted CEOs’ time spent on dealing with the pandemic.
    Keywords: Productivity; reallocation; Covid-19; growth
    JEL: O32 O33
    Date: 2020–12–21
  4. By: Mohamedou Nasser Dine (Osaka University)
    Abstract: Based on the world input-output database 2016 (WIOD), this study examines the impact of the global value chain (GVCs), via the backward and forward linkages, on labor productivity. Using a spatial econometric approach, it pays particular attention to the spillover effects in productivity across industries through input-output relations. It is shown that a stochastic shock in productivity in one sector significantly transcends and boosts productivity in other sectors through input-output dependencies. Moreover, productivity significantly declines with backward linkages within their sectors. However, productivity increases with forward linkages both within own sectors and across sectors through input-output relations. A sectoral analysis of the GVCs' effects on productivity reveals that manufacturing backward linkages is negatively associated with productivity not only within own sectors but also across manufacturing sectors, whereas productivity in service sectors rises with forward linkages within and across service sectors. This study shows that ignoring the spillovers effects across sectors causes the estimates to be biased
    Date: 2020–12–20
  5. By: Iraj Daizadeh
    Abstract: Through time series analysis, this paper empirically explores, confirms and extends the trademark/patent inter-relationship as proposed in the normative intellectual-property (IP)-oriented Innovation Agenda view of the science and technology (S&T) firm. Beyond simple correlation, it is shown that trademark-filing (Trademarks) and patent-application counts (Patents) have similar (if not, identical) structural attributes (including similar distribution characteristics and seasonal variation, cross-wavelet synchronicity/coherency (short-term cross-periodicity) and structural breaks) and are cointegrated (integration order of 1) over a period of approximately 40 years (given the monthly observations). The existence of cointegration strongly suggests a "long-run" equilibrium between the two indices; that is, there is (are) exogenous force(s) restraining the two indices from diverging from one another. Structural breakpoints in the chrono-dynamics of the indices supports the existence of potentially similar exogeneous forces(s), as the break dates are simultaneous/near-simultaneous (Trademarks: 1987, 1993, 1999, 2005, 2011; Patents: 1988, 1994, 2000, and 2011). A discussion of potential triggers (affecting both time series) causing these breaks, and the concept of equilibrium in the context of these proxy measures are presented. The cointegration order and structural co-movements resemble other macro-economic variables, stoking the opportunity of using econometrics approaches to further analyze these data. As a corollary, this work further supports the inclusion of trademark analysis in innovation studies. Lastly, the data and corresponding analysis tools (R program) are presented as Supplementary Materials for reproducibility and convenience to conduct future work for interested readers.
    Date: 2020–12
  6. By: Gamal Atallah (Department of Economics, University of Ottawa, Ottawa, ON); Parisa Pourkarimi (Department of Economics, Carleton University)
    Abstract: This paper studies the impact of cooperative R&D on innovation, welfare, and profitability in vertically related industries where products are differentiated. The model incorporates two vertically related industries, with horizontal spillovers within each industry and vertical spillovers between the two industries. Upstream firms produce a homogeneous intermediate good, while downstream firms provide differentiated products. Three types of R&D cooperation are studied: no cooperation, horizontal cooperation, and vertical cooperation. The comparison of cooperation settings in terms of R&D and of profitability shows that although vertical cooperation yields higher innovation and welfare, it may lead firms to over–invest in R&D.
    Keywords: Vertical spillovers, Horizontal spillovers, Product differentiation, R&D Cooperation.
    Date: 2020
  7. By: Rosario Aldunate; Gabriela Contreras; Matías Tapia
    Abstract: We use a matched employer-employee census of formal employment in Chile to characterize the distribution of formal labor earnings between 2005 and 2016. We decompose the overall dispersion in earnings across workers into between and within-firm components, and then use a two-way fixed effect model with no complementarities for individual earnings (the AKM model) to compare the contributions of firm and worker heterogeneity toward changes in dispersion. First, we find a decline in the dispersion of labor earnings throughout the decade, which is driven almost completely by a reduction in the variance of average earnings between firms. The dispersion of earnings within firms, which explain more than half of the overall dispersion and correlates strongly with productivity at the firm level, did not change. Second, AKM estimates show that systematic differences across workers explain the bulk of earning differences, and that the reduction in worker heterogeneity was the main driver towards a more compact earnings distribution, an effect that was complemented by weaker sorting patterns. Finally, although our results suggest that the AKM model provides a good first-order approximation to the labor earnings determination process, we use an alternative specification that allows for worker-firm complementarities. This estimation suggests a stronger role for sorting and an even weaker role for firms in explaining labor earnings differences in Chile.
    Date: 2020–11
  8. By: Frank Schweitzer; Giona Casiraghi; Mario V. Tomasello; David Garcia
    Abstract: The dynamics of collaboration networks of firms follow a life-cycle of growth and decline. That does not imply they also become less resilient. Instead, declining collaboration networks may still have the ability to mitigate shocks from firms leaving, and to recover from these losses by adapting to new partners. To demonstrate this, we analyze 21.500 R\&D collaborations of 14.500 firms in six different industrial sectors over 25 years. We calculate time-dependent probabilities of firms leaving the network and simulate drop-out cascades, to determine the expected dynamics of decline. We then show that deviations from these expectations result from the adaptivity of the network, which mitigates the decline. These deviations can be used as a measure of network resilience.
    Date: 2020–11
  9. By: Jaraite, Jurate (CERE - the Center for Environmental and Resource Economics); Kurtyka , Oliwia (Univ. Grenoble Alpes); Olliver, Hélène (Paris School of Economics)
    Abstract: This study examines the causal impacts of the Clean Development Mechanism (CDM) on the environmental performance of Indian manufacturing firms, as measured by their energy use, carbon dioxide (CO2) emissions, and respective intensities. The impacts of CDM projects are estimated by combining statistical matching with the difference-in-differences approach. We found that CDM projects significantly reduced firms' CO2 emission intensity and energy intensity, but had no effect on total CO2 emissions. These results reveal that CDM projects led to an emission-reducing technique effect (decreased CO2 intensity) and to a positive scale effect (increased sales), and that the latter effect muted the impacts of the former. One of the channels of the technique effect rests on participating firms increasingly generating their electricity on site and relying more on renewable energies. Our results suggest that CDM projects improved firms' environmental performance, even though firm-level absolute CO2 emissions did not decline.
    Keywords: additionality; carbon offsets; CDM projects; CO2 emissions; firms environmental performance; India; micro level data
    JEL: D22 Q53 Q54 Q58
    Date: 2021–01–04
  10. By: Kyvik Nordås, Hildegunn (Örebro University School of Business); Klügl, Franziska (School of Science and Technology)
    Abstract: This paper studies the uptake of AI-driven automation and its impact on employment, using a dynamic agent-based model (ABM). It simulates the adoption of automation software as well as job destruction and job creation in its wake. There are two types of agents: manufacturing firms and engineering services firms. The agents choose between two business models: consulting or automated software. From the engineering firms’ point of view, the model exhibits static economies of scale in the software model and dynamic (learning by doing) economies of scale in the consultancy model. From the manufacturing firms’ point of view, switching to the software model requires restructuring of production and there are network effects in switching. The ABM matches engineering and manufacturing agents and derives employment of engineers and the tasks they perform, i.e. consultancy, software development, software maintenance, or employment in manufacturing. Policy parameters influencing the results are occupational licensing and protection of intellectual property rights. We find that the uptake of software is gradual; slow in the first few years and then accelerates. Software is fully adopted after about 18 years in the base line run. The adoption rate is slower the higher the license fee for software, while the adoption rate is faster the higher the mark-up rate of consultancy. Employment of engineers shifts from consultancy to software development and to new jobs in manufacturing. Spells of unemployment may occur, if skilled jobs creation in manufacturing is slow. Finally, the model generates boom and bust cycles in the software sector.
    Keywords: Technology Uptake; Employment; Automation; Economic Modelling; Agent-Based Simulation
    JEL: C51 C61 J44 L84 O33
    Date: 2020–12–23
  11. By: He, Qichun; Wang, Xilin
    Abstract: We incorporate endogenous human capital accumulation into a scale-invariant Schumpeterian growth model with endogenous market structure. Endogenous human capital accumulation leads to continuous entry of firms. Therefore, continuous horizontal innovation is sustained by human capital accumulation in the absence of population growth and becomes a twin engine of long-run growth (together with vertical innovation). We then study monetary policy by considering a cash-in-advance constraint on consumption. We find that when the capital share in final good production is low (high), the effect of inflation on growth is positive (negative). We then use cross-country panel regressions to test the theoretical prediction and find that inflation and capital share have a significant, negative interaction effect on growth, which provides support for our theory.
    Keywords: Monetary policy; Human capital; Endogenous market structure; Economic growth
    JEL: E41 I15 O30 O40
    Date: 2020–12
  12. By: Coad, Alex (Waseda Business School, Tokyo, Japan); Daunfeldt, Sven-Olov (Institute of Retail Economics (Handelns Forskningsinstitut)); Halvarsson, Daniel (The Ratio Institute, Stockholm)
    Abstract: In the race to the South Pole, Roald Amundsen’s expedition covered an equal distance each day, irrespective of weather conditions, while Scott’s pace was erratic. Amundsen won the race and returned without loss of life, while Scott and his men died. We investigate how firms’ sales growth deviate from the long-run average growth path. Our baseline results suggest that growth path volatility is associated with higher growth of sales and profits, but is also associated with higher exit rates. This is driven by firms with negative growth rates. For positive-growth firms, volatility is negatively associated with both sales growth and survival.
    Keywords: Firm dynamics; Sales growth; Firm exit; Growth paths; Scale-up; Postentry growth
    JEL: D22 L25 L26
    Date: 2020–12–28

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