nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2021‒02‒15
twelve papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Automating labor: evidence from firm-level patent data By Dechezlepretre, Antoine; Hemous, David; Olsen, Morten; Zanella, Carlo
  2. How Does Competition by Informal and Formal Firms Affect the Innovation and Productivity Performance in Peru? A CDM Approach By Alvarez, Lourdes; Huamaní, Edson; Coronado, Yngrid
  3. Environmental preferences and technological choices: is market competition clean or dirty? By Phillipe Aghion; Roland Bénabou; Ralf Martin; Alexandra Roulet
  4. Local Labor Market Impacts of Advanced Manufacturing Technologies: Evidence from European Nuts-3 Regions. By Orsatti, Gianluca; Quatraro, Francesco
  5. The Impact of Regulation on Innovation By Philippe Aghion; Antonin Bergeaud; John Van Reenen
  6. Dream jobs By Mion, Giordano; Opromolla, Luca David; Ottaviano, Gianmarco I. P.
  7. The Organization of Innovation: Property Rights and the Outsourcing Decision By Thomas Jungbauer; Sean Nicholson; June Pan; Michael Waldman
  8. What Drives Innovation? Lessons from COVID-19 R&D By Agarwal, Ruchir; Gaule, Patrick
  9. Automation, globalization and vanishing jobs: a labor market sorting view By Faia, Ester; Laffitte, Sebastien; Mayer, Maximilian; Ottaviano, Gianmarco I. P.
  10. No inventor is an island: social connectedness and the geography of knowledge flows in the US By Diemer, Andreas; Regan, Tanner
  11. Job quality and labour market transitions: Evidence from Mexican informal and formal workers By Emily Conover; Melanie Khamis; Sarah Pearlman
  12. Structural Interventions in Networks By Yang Sun; Wei Zhao; Junjie Zhou

  1. By: Dechezlepretre, Antoine; Hemous, David; Olsen, Morten; Zanella, Carlo
    Abstract: Do higher wages lead to more automation innovation? To answer this question, we first introduce a new measure of automation by using the frequency of certain keywords in patent text to identify automation innovations in machinery. We validate our measure by showing that it is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. Then we build a firm-level panel dataset on automation patents. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of lowskill and high-skill wages. We find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 4. An increase in highskill wages tends to reduce automation innovation. Placebo regressions show that the effect is specific to automation innovations. Finally, we use the Hartz labor market reforms in Germany for an event study and find that they are associated with a relative reduction in automation innovations.
    Keywords: automation; innovation; patents; income inequality
    JEL: O31 O33 J20
    Date: 2020–02
  2. By: Alvarez, Lourdes; Huamaní, Edson; Coronado, Yngrid
    Abstract: Innovation is one of the main determinants to stimulate productivity. However, incentives to innovate may be affected by the level of competition. In particular, in developing countries, where informality is highly prevalent, formal firms have to face both types of competition: formal and informal. Previous studies have acknowledged a negative impact from competition (schumpeterian effect) but also, several recent studies have shown that competition could spur innovation (escape-competition effect). Given the importance of informal competition in developing countries, as Peru, where almost three out of four firms are informal and the intensity of investment in R&D+i activities is pretty low, this study aims to evaluate the impact of formal and informal competition, at the industrial level, on the whole innovation process and, expressly, on productivity for Peru. By using a CDM model, this study analyses how the intensity of formal and informal competition affects every stage of the innovation process. The CDM model makes possible to study four interrelated stages of the innovation process: i) the firms’ choice to engage with innovation, ii) the amount of resources invested in R&D+i activities, iii) the effects of R&D+i investments on innovation output, and iv) the impacts of innovation outcome on firms’ productivity. The model is estimated using firm-level data collected by the Peruvian National Innovation Survey 2018 and the National Business Survey 2018. Our main findings indicate that competition, both formal and informal, affects negatively the decision to engage in innovation. However, the relationship changes throughout the remaining stages of the innovation process. Whereas the informal competition affects negatively the whole innovation process (engage in innovation, intensity of R&D+I activities spending, innovation output and firms’ productivity) satisfying the Schumpeterian theory; formal competition seems to affect positively the intensity of R&D+i activities spending and also firms’ productivity, which can be explained as an escape-competition effect within the formal firms. In conclusion, meanwhile it is found that informal competition affects negatively the whole innovation process, formal competition could, instead, encourage formal firms’ willingness to invest more in R&D+i activities, increasing their productivity.
    Keywords: Competition, CDM model, informality, innovation, productivity
    JEL: D4 E26 M11 O17 O32
    Date: 2020–09
  3. By: Phillipe Aghion; Roland Bénabou; Ralf Martin; Alexandra Roulet
    Abstract: This paper investigates the joint effect of consumers' environmental concerns and product-market competition on firms' decisions whether to innovate "clean" or "dirty". We first develop a step-by-step innovation model to capture the basic intuition that socially responsible consumers induce firms to escape competition by pursuing greener innovations. To test and quantify the theory, we bring together patent data, survey data on environmental values, and competition measures. Using a panel of 8,562 firms from the automobile sector that patented in 42 countries between 1998 and 2012, we indeed find that greater exposure to environmental attitudes has a significant positive effect on the probability for a firm to innovate in the clean direction, and all the more so the higher the degree of product market competition. Results suggest that the combination of historically realistic increases in prosocial attitudes and product market competition can have the same effect on green innovation as major increase in fuel prices.
    Keywords: environment, product market competition, innovation
    Date: 2020–03
  4. By: Orsatti, Gianluca; Quatraro, Francesco (University of Turin)
    Abstract: Based on the established literature about substitution and compensation effects, this paper provides one of the first analyses of the relationship between digital technologies and employment at the regional level in Europe. We posit that idiosyncratic factors of local labor markets are likely to generate place- specific responses to the introduction of new technologies. Spatial spillovers are also likely to emerge. The geographical level of analysis is therefore the most appropriate. Our analysis confirms that there is a significant relationship between the local specialization in advanced manufacturing technologies and employment. Mainly driven by automation-related technologies, we indeed estimate negative effects of advanced manufacturing technologies on local employment creation. Conversely, digital technologies play a positive role in enhancing local labor productivity. Finally, technological performances of neighbour regions play a significant role in shaping local labor productivity, while not significantly affecting local employment creation.
    Date: 2020–11
  5. By: Philippe Aghion; Antonin Bergeaud; John Van Reenen
    Abstract: Does regulation affect the pace and nature of innovation and if so, by how much? We build a tractable and quantifiable endogenous growth model with size-contingent regulations. We apply this to population administrative firm panel data from France, where many labor regulations apply to firms with 50 or more employees. Nonparametrically, we find that there is a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Further, a dynamic analysis shows a sharp reduction in the firm’s innovation response to exogenous demand shocks for firms just below the regulatory threshold. We then quantitatively fit the parameters of the model to the data, finding that innovation at the macro level is about 5.4% lower due to the regulation, a 2.2% consumption equivalent welfare loss. Four-fifths of this loss is due to lower innovation intensity per firm rather than just a misallocation towards smaller firms and lower entry. We generalize the theory to allow for changes in the direction of R&D, and find that regulation’s negative effects only matter for incremental innovation (as measured by citations and text-based measures of novelty). A more regulated economy may have less innovation, but when firms do innovate they tend to “swing for the fence” with more radical (and labor saving) breakthroughs.
    JEL: J08 O33
    Date: 2021–01
  6. By: Mion, Giordano; Opromolla, Luca David; Ottaviano, Gianmarco I. P.
    Abstract: Understanding why certain jobs are ‘better’ than others and what implications they have for a worker’s career is clearly an important but still relatively unexplored question. We provide both a theoretical framework and a number of empirical results that help distinguishing ‘good’ from ‘bad’ jobs in terms of their impact on a worker’s lifetime wage income profile through wage jumps occurring upon changing job (‘static effects’) or through increases in the wage growth rate (‘dynamic effects’). We find that the distinction between internationally active firms and domestic firms is a meaningful empirical dividing line between employers providing ‘good’ and ‘bad’ jobs. First, in internationally active firms the experience-wage profile is much steeper than in domestic firms, especially for managers as opposed to blue-collar workers. Second, the higher lifetime wage income for managers in internationally active firms relies on the stronger accumulation of experience that these firms allow for and on the (almost) perfect portability of the accumulated dynamic wage gains to other firms. Static effects are instead much more important for blue-collar workers. Finally, the distinction between internationally active and domestic firms is relevant also at a more aggregate level to explain cross-sectional differences in wages among workers and spatial differences in average wages across regions within a country.
    Keywords: good jobs; international experience; managers; sorting; wage growth; wage premium
    JEL: J30 M12 J62 F16
    Date: 2020–07
  7. By: Thomas Jungbauer; Sean Nicholson; June Pan; Michael Waldman
    Abstract: Why do firms outsource research and development (R&D) for some products while conducting R&D in-house for similar ones? An innovating firm risks cannibalizing its existing products. The more profitable these products, the more the firm wants to limit cannibalization. We apply this logic to the organization of R&D by introducing a novel theoretical model in which developing in-house provides the firm more control over the new product’s location in product space. An empirical analysis of our testable predictions using pharmaceutical data concerning patents, patent expiration, and outsourcing at various stages of the R&D process supports our theoretical findings.
    JEL: D23 L24 L65 O32
    Date: 2021–01
  8. By: Agarwal, Ruchir (International Monetary Fund); Gaule, Patrick (University of Bath)
    Abstract: To examine the drivers of innovation, this paper studies the global R&D effort to fight the deadliest diseases and presents four results. We find: (1) global pharmaceutical R&D activity—measured by clinical trials—typically follows the 'law of diminishing efforts': i.e. the elasticity of R&D effort with respect to market size is about 1/2 in the cross-section of diseases; (2) the R&D response to COVID-19 has been a major exception to this law, with the number of COVID-19 trials being 7 to 20 times greater than that implied by its market size; (3) the aggregate short-term elasticity of science and innovation can be very large, as demonstrated by aggregate flow of clinical trials increasing by 38% in 2020, with limited crowding out of trials for non-COVID diseases; and (4) public institutions and government-led incentives were a key driver of the COVID-19 R&D effort—with public research institutions accounting for 70 percent of all COVID-19 clinical trials globally and being 10 percentage points more likely to conduct a COVID-19 trial relative to private firms. Overall, while economists are naturally in favor of market size as a driving force for innovation (i.e."if the market size is sufficiently large then innovation will happen"), our work suggests that scaling up global innovation may require a broader perspective on the drivers of innovation—including early-stage incentives, non-monetary incentives, and public institutions.
    Keywords: COVID-19, innovation, market size, pharmaceutical industry
    JEL: O31 O38 J24
    Date: 2021–01
  9. By: Faia, Ester; Laffitte, Sebastien; Mayer, Maximilian; Ottaviano, Gianmarco I. P.
    Abstract: We show, theoretically and empirically, that the effects of technological change associated with automation and offshoring on the labor market can substantially deviate from standard neoclassical conclusions when search frictions hinder efficient assortative matching between firms with heterogeneous tasks and workers with heterogeneous skills. Our key hypothesis is that better matches enjoy a comparative advantage in exploiting automation and a comparative disadvantage in exploiting offshoring. It implies that automation (offshoring) may reduce (raise) employment by lengthening (shortening) unemployment duration due to higher (lower) match selectivity. We find empirical support for this implication in a dataset covering 92 occupations and 16 sectors in 13 European countries from 1995 to 2010.
    Keywords: automation; offshoring; two-sided heterogeneity; positive assortativity; wage inequality; horizontal specialization; core-task-biased technological change
    JEL: O33 O47 F16 J64
    Date: 2020–05–29
  10. By: Diemer, Andreas; Regan, Tanner
    Abstract: Do informal social ties connecting inventors across distant places promote knowledge flows between them? To measure informal ties, we use a new and direct index of social connectedness of regions based on aggregate Facebook friendships. We use a well-established identification strategy that relies on matching inventor citations with citations from examiners. Moreover, we isolate the specific effect of informal connections, above and beyond formal professional ties (co-inventor networks) and geographic proximity. We identify a significant and robust effect of informal ties on patent citation. Further, we find that the effect of geographic proximity on knowledge flows is entirely explained by informal social ties and professional networks. We also show that the effect of informal social ties on knowledge flows: has become increasingly important over the last two decades, is higher for older or `forgotten' patents, is more important for
    Keywords: knowledge flows; diffusion; social connectedness; informal networks
    JEL: O33 R12 Z13
    Date: 2020–11
  11. By: Emily Conover; Melanie Khamis; Sarah Pearlman
    Abstract: In this paper we analyse informal work in Mexico, which accounts for the majority of employment in the country and has grown over time. We document that the informal sector is composed of two distinct parts: salaried informal employment and self-employment. Relative to self-employment and formal salaried employment, on average informal salaried workers have lower wages and lower job quality as measured by an index. Education plays a different role in job matches and job transitions, depending on the type of informal employment.
    Keywords: Informal work, job quality, Labour market dynamics, Mexico
    Date: 2021
  12. By: Yang Sun; Wei Zhao; Junjie Zhou
    Abstract: Two types of interventions are commonly implemented in networks: characteristic intervention which influences individuals' intrinsic incentives, and structural intervention which targets at the social links among individuals. In this paper we provide a general framework to evaluate the distinct equilibrium effects of both types of interventions. We identify a hidden equivalence between a structural intervention and an endogenously determined characteristic intervention. Compared with existing approaches in the literature, the perspective from such an equivalence provides several advantages in the analysis of interventions targeting on network structure. We present a wide range of applications of our theory, including identifying the most wanted criminal(s) in delinquent networks and targeting the key connector for isolated communities.
    Date: 2021–01

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