nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2021‒04‒12
twelve papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Artificial Intelligence, Globalization, and Strategies for Economic Development By Anton Korinek; Joseph E. Stiglitz
  2. An Agent-based Model for Secular Stagnation in the USA: Theory and Empirical Evidence By Andrea Borsato
  3. Guaranteed Markets and Corporate Scientific Research By Sharon Belenzon; Larisa C. Cioaca
  4. Entrepreneurship in Cities By Tavassoli, Sam; Obchonka, Martin; Audretsch, David B.
  5. Internationalization, Product Innovation and the moderating Role of National Diversity in the Employment Base By Schubert, Torben
  6. The Role of Location on Complexity of Firms’ Innovation Outcome By Tavassoli, Sam; Karlsson, Charlie
  7. Unleashing the full potential of the Turkish business sector By Dennis Dlugosch; Rauf Gönenç; Yusuf Kenan Bağır; Hüzeyfe Torun; Eun Jung Kim
  8. Improved Framework Conditions for a More Entrepreneurial, Innovative and Sustainable EU By Elert, Niklas; Henrekson, Magnus
  9. Worker Reallocation, Firm Innovation, and Chinese Import Competition By Gu, Grace; Malik, Samreen; Pozzoli, Dario; Rocha, Vera
  10. What has driven the delinking of wages from productivity? A political economy-based investigation for high-income economies By Walter Paternesi Meloni; Antonella Stirati
  11. Immigrant Workers, Firm Export Performance and Import Competition By Léa Marchal; Giulia Sabbadini
  12. Research Methods of Assessing Global Value Chains By Sourish Dutta

  1. By: Anton Korinek (Darden School of Business, University of Virginia); Joseph E. Stiglitz (Columbia University)
    Abstract: Progress in artificial intelligence and related forms of automation technologies threatens to reverse the gains that developing countries and emerging markets have experienced from integrating into the world economy over the past half century, aggravating poverty and inequality. The new technologies have the tendency to be labor-saving, resource-saving, and to give rise to winner-takes-all dynamics that advantage developed countries. We analyze the economic forces behind these developments and describe economic policies that would mitigate the adverse effects on developing and emerging economies while leveraging the potential gains from technological advances. We also describe reforms to our global system of economic governance that would share the benefits of AI more widely with developing countries.
    Keywords: Artificial Intelligence, inequality, technological development, redistribution.
    JEL: E64 D63 O3
    Date: 2021–02–04
  2. By: Andrea Borsato
    Abstract: The paper extends the research started with Borsato (2020). I develop an agent-based, stock-flow consistent growth model to analyze the interplay between income distribution, innovation and productivity growth. Results still show that the mounting shrinkage of the labour share impacts negatively upon firm's innovative effort. Additionally, I question the neoclassical belief on the negative interest-elasticity of investments, since decreases in the rate of interest are not associated with increases in capital accumulation. Finally, the panel cointegration analysis based on US manufacturing industries corroborates the theoretical predictions for the period 1958 - 2011.
    Keywords: Secular Stagnation; Innovation dynamics; Income distribution; Agent-based SFC models; US manufacturing industries; Panel cointegration analysis.
    Date: 2021–03–31
  3. By: Sharon Belenzon; Larisa C. Cioaca
    Abstract: Firms invest in scientific research to increase their chances of landing lucrative procurement contracts with the U.S. government. This is an important, but understudied channel through which the government encourages corporate research, particularly when other market mechanisms are insufficient. Using data on $2.3 trillion in contracts matched to 4,323 publicly traded manufacturing firms from 1980 through 2015, we estimate the effect of procurement contracts on upstream (scientific publications) and downstream (patents) corporate R&D. We document a positive effect of contracts on publications, and show that the effect is stronger when market incentives are weak. Procurement contracts encourage publications that: (i) are not used in the firm's internal inventions, (ii) spill over to rivals' inventions, and (iii) are not protected by patents. However, the effect has weakened over time, because the U.S. government has emphasized reduced cost and increased efficiency and transparency in contract awards. Following such policy reforms as the Federal Acquisition Streamlining Act of 1994, the share of R&D contracts in all contracts declined from a high of 25 percent in 1998 to 7 percent in 2015, while the share of commercial contracts grew from 6 percent to 14 percent over the same period. Our results imply that the reorientation of government procurement toward commercially proven technologies has contributed to the withdrawal of corporations from participating in scientific research.
    JEL: O3 O31 O32 O33 O38
    Date: 2021–04
  4. By: Tavassoli, Sam (RMIT University); Obchonka, Martin (Australian Center for Entrepreneurship Research); Audretsch, David B. (Indiana University)
    Abstract: Impactful, growth-oriented entrepreneurship is a major research and policy focus. Building on arguments put forward by Jane Jacobs more than 50 years ago, we propose that local knowledge spillovers in a city are enhanced by human agency in that city (e.g. local psychological openness). This effect is critically amplified by the catalyst function of a favorable structural city environment that not only connects these agentic people (via urban density), but also facilitates the production and flow of new knowledge for these connected agentic people (via a diverse industry mix). This three-way interaction effect was confirmed in our empirical investigation of quality entrepreneurship across the MSAs (cities) in the US, using a large-scale dataset of the psychological profiles of millions of people. Local openness shows a robust positive effect on the level of quality entrepreneurship. This effect is further strengthened by a favorable structural city environment (i.e. high density and diversity) by up to 35%. Reviving Jacobs’ people focus, the results indicate that the best performing cities in terms of knowledge spillovers and economic performance are those that are not only home to, and attract, agentic people, but also empower these people by means of a physical and industrial city landscape that enables them to act in more innovative and entrepreneurial ways, as envisioned by Jacobs. We discuss the policy implications of our findings and an agenda for future research.
    Keywords: Entrepreneurship; Cities; Jacobs externalities; Knowledge Spillovers; Diversity; Density; Personality traits; Openness; Geographical psychology
    JEL: D83 D91 L26 O18
    Date: 2021–03–30
  5. By: Schubert, Torben (CIRCLE, Lund University)
    Abstract: The effects of establishing foreign-based subsidiaries on firm performance have long been debated, where empirical evidence hints at gains in terms of costs reductions, productivity or growth. Yet, little is known about the effects on innovative capabilities at the home base. Using a matched-employer-employee panel dataset of the Swedish Community Innovation Surveys (CIS) between 2008 and 2014, we estimate whether the employee share at subsidiaries abroad affects product innovation performance at home. Our results show the effects are positive on average. However, there is also evidence of detrimental effects of having employees abroad on innovation. In particular, for excessive shares of employees at foreign location, we provide evidence of an inverted u-shape between the probability to introduce product innovations and the share of foreign employment. Moreover, we show that the benefits of foreign employment are larger for firms with a more nationally diverse workforce at the home base. Our results are robust to a wide variety of robustness checks.
    Keywords: Internationalization; Innovation; Diversity
    JEL: M14 M16 O32
    Date: 2021–03–30
  6. By: Tavassoli, Sam (RMIT University); Karlsson, Charlie (Jönköping International Business School)
    Abstract: In this paper we analyze how the location of firms influences their innovation outcomes, particularly the complexity of the outcomes. Using three waves of the Community Innovation Survey in Sweden for a balanced panel of firms from 2006 to 2012, we identified a range of innovation outcome categories, i.e. simple and complex (low-, medium-, highly-complex) innovation outcomes. The backbone of such categorization is based on how firms introduce a combination of Schumpeterian types of innovations (i.e. process, product, marketing, and organizational). Then we consider three regional characteristics that may affect the innovation outcomes of firms, i.e. (i) qualified labor market thickness, (ii) knowledge-intensive services thickness, and (iii) knowledge spillovers extent. We find that regional characteristics do not affect firms’ innovation outcomes in terms of their degree of complexity ubiquitously. They are only positively associated with those firms that introduce the most complex innovation outcomes. For firms with less complex innovation outcomes, regional factors seem not to play a pivotal role. For these innovators, internal resources as well as formal collaboration with external partners have a significant role.
    Keywords: innovation outcome; location; agglomeration economies; knowledge spillovers; Community Innovation Survey
    JEL: D22 L20 O31 O32
    Date: 2021–03–30
  7. By: Dennis Dlugosch; Rauf Gönenç; Yusuf Kenan Bağır; Hüzeyfe Torun; Eun Jung Kim
    Abstract: Productivity in Turkey has been growing stronger than in most peer countries since 2010 but has slowed down. Despite a remarkably entrepreneurial population, business dynamism has also been less vigorous in recent years. This working paper discusses the factors behind this slowdown and analyses a wide range of structural policies that would help to revive productivity growth and unleash the full potential of the Turkish business sector. The elevated number of informal, semi-formal and fully formal forms constitutes a key impediment to higher growth and more high-quality jobs. Structural reforms that allow more flexibility in labour markets, more competition in product markets and major progress with the quality of governance would foster productivity growth, job creation but also boost the digital transformation. Streamlining and simplifying the complex system of regulations and government support schemes would prevent firms from clustering around eligibility thresholds and thus remove obstacles to the upscaling of firms.
    Keywords: capital structure of the business sector, digitalization, informal labour markets, productivity, Turkey
    JEL: E22 E26 G30 G38 G21 J21 J11
    Date: 2021–04–13
  8. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: In the wake of the corona crisis, the European Union must regain lost ground and create more favorable conditions for inclusive and sustainable economic growth. The best way to achieve this goal is by increasing the Union’s innovativeness. This effort requires extensive and broad-based institutional reforms aimed at strengthening the incentives for entrepreneurship. Innovative entrepreneurship requires collaborations with numerous agents that provide those skills and resources that the entrepreneur is lacking: inventors, key personnel, demanding customers, and early and later-stage financiers. Based on this ecosystem perspective, we propose reforms in the following six broad areas: (i) the rule of law and property rights, ii) taxation, iii) savings and finance, iv) labor market regulations and social security, v) entry and exit barriers in product markets, and (vi) human capital for entrepreneurship. The reforms would likely strengthen Europe’s innovation capacity at a time when it is needed more than ever.
    Keywords: Entrepreneurship; European Union; Innovation; Institutions; Policy reform; Regulation; Self-employment
    JEL: L26 L50 M13 O38 O52 P14
    Date: 2021–03–25
  9. By: Gu, Grace (University of California Santa Cruz); Malik, Samreen (New York University AD); Pozzoli, Dario (Department of Economics, Copenhagen Business School); Rocha, Vera (Department of Economics, Copenhagen Business School)
    Abstract: While recent work has documented a nexus between international trade and firm innovation, the underlying mechanisms explaining _rms' innovation in response to import competition are thus far poorly understood. To identify such mechanisms and their economic relevance, we use longitudinal linked employer-employee data from Denmark (1995-2012) and conduct analyses at both the firm and worker levels. We first show that import competition triggers a significant increase in innovation. Approximately 40 percent of the innovation effect is attributable to the increase in the share of R&D workers; 14 percent of this increase in the share of R&D workers is due to within-firm worker switching to R&D jobs, while 80 percent is explained by between-firm worker reallocation. Furthermore, we show that having a larger degree of between-firm worker reallocation to R&D jobs relative to within-firm switching is associated with more innovation. The salience of between-firm reallocation is further confirmed by a worker-level analysis, and its importance to innovation is underscored when we extend our analysis to Portugal.
    Keywords: Import competition; Innovation; Between-firm worker reallocation; Within-firm worker reallocation
    JEL: F12 F14 O31
    Date: 2021–03–26
  10. By: Walter Paternesi Meloni; Antonella Stirati
    Abstract: The drop in the labor share experienced in high-income countries in the last three to four decades testifies to a general divergence in the growth rates of labor productivity and average wages. In this respect, we first quantify the magnitude of this decoupling; second, we inquire into the factors that prevented wage growth from keeping pace with productivity. We endorse a ‘political economy’ approach – a line of inquiry which has been recently fueled and followed by the post-Keynesian literature – focusing on the effects on wage dynamics of some macroeconomic and institutional factors in a panel of 22 OECD economies for the post-1970 period. We find that, on average and over the cycle, only 50% of increased productivity went to workers. Our empirics indicate that labor market slack and the weakening of pro-labor institutions have acted as wage-squeezing factors; a negative effect is also found for globalization, specifically for trade openness and international capital mobility. Other aspects of the process of financialization, such as market capitalization and the dynamics of the real interest rate, seem not to have exerted a substantial impact on real wage growth.
    Keywords: political economy; income distribution; labor market institutions; labor market slack; globalization; financialization
    JEL: E25 J30 P16
    Date: 2021–03
  11. By: Léa Marchal (UP1 - Université Paris 1 Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Giulia Sabbadini (Institut de hautes études internationales et du développement - Graduate Institute of International and Development Studies [Geneva, Switzerland])
    Abstract: This paper investigates whether the employment of immigrant workers affects the performance of firms in their export markets when they are facing an increase in import competition. Exploiting the surge of Chinese imports following its accession to the World Trade Organization and using a sample of French manufacturing exporters from 2002 to 2015, we find that an increase in the growth rate of Chinese imports in a market has a negative effect on both the survival probability of firms and the growth rate of sales on that market. This negative effect on firm performance is mitigated by the employment of immigrant workers.
    Keywords: Firm,Heterogeneity,Immigrant workers,Import competition,Productivity
    Date: 2021–03
  12. By: Sourish Dutta
    Abstract: The global production (as a system of creating values) is eventually forming a vast web of value chains that explains the transitional structures of global trade and development of the world economy. It is truly a new wave of globalisation, and we can term it as the global value chains (GVCs), creating the nexus among firms, workers and consumers around the globe. The emergence of this new scenario is asking how an economy's businesses, producers and employees are connecting to the global economy and capturing the gains out of it regarding different dimensions of economic development. Indeed, this GVC approach is very crucial for understanding the organisation of the global industries (including firms) through analysing the statics and dynamics of different economic players involved in this complex global production network. Its widespread notion deals with various global issues (including regional value chains also) from the top down to the bottom up, founding a scope for policy analysis.
    Date: 2021–02

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