nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2021‒05‒03
fourteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Artificial intelligence and industrial innovation: Evidence from firm-level data By Rammer, Christian; Fernández, Gastón P.; Czarnitzki, Dirk
  2. Detecting the labour-friendly nature of AI product innovation By Giacomo Damioli; Vincent Van Roy; Daniel Vertesy; Marco Vivarelli
  3. The Future of Employment Revisited: How Model Selection Determines Automation Forecasts By Fabian Stephany; Hanno Lorenz
  4. Induced automation: evidence from firm-level patent data By Antoine Dechezleprêtre; David Hémous; Morten Olsen; Carlo Zanella
  5. Spatial internet spillovers in manufacturing By Joël Cariolle; Maëlan Le Goff
  6. Mobilizing innovation for the global green shift: The case for demand-oriented innovation policy By Jan Fagerberg
  7. New directions for RIS studies and policies in the face of grand societal challenges By Franz Tödtling; Michaela Trippl; Veronika Desch
  8. The interplay between green policy, electricity prices, financial constraints and jobs. Firm-level evidence By Gert Bijnens; John Hutchinson; Jozef Konings; Arthur Saint Guilhem
  9. Renewable Electricity and Economic Growth relationship in the long run: panel data econometric evidence from the OECD By Saptorshee Kanto Chakraborty; Massimiliano Mazzanti
  10. The reward and contract theories of patents in a model of endogenous growth By Klein, Michael A
  11. Patent Boxes and the Success Rate of Applications By Ronald B. Davies; Ryan M. Hynes; Dieter Franz Kogler
  12. Perspectives on Trade and Structural Transformation By George A. Alessandria; Robert C. Johnson; Kei-Mu Yi
  13. Technology, Market Structure and the Gains from Trade By Giammario Impullitti; Omar Licandro; Pontus Rendahl
  14. Two-Dimensional Constrained Chaos and Industrial Revolution Cycles with Mathemetical Appendices By Makoto Yano; Yuichi Furukawa

  1. By: Rammer, Christian; Fernández, Gastón P.; Czarnitzki, Dirk
    Abstract: Artificial Intelligence (AI) represents a set of techniques that enable new ways of innovation and allows firms to offer new features of products and services, to improve production, marketing and administration processes, and to introduce new business models. This paper analyses the extent to which the use of AI contributes to the innovation performance of firms. Based on firm-level data from the German part of the Community Innovation Survey (CIS) 2018, we examine the contribution of different AI methods and applications to product and process innovation outcomes. The representative nature of the survey allows extrapolating the findings to the macroeconomic level. The results show that 5.8% of firms in Germany were actively using AI in their business operations or products and services in 2019. The use of AI generated additional sales with world-first product innovations in these firms of about €16 billion, which corresponds to 18% of total sales of world-first innovations in the German business sector. Firms that developed AI by combining in-house and external resources obtained significantly higher innovation results. The same is true for firms that apply AI in a broad way and have already several years of experience in using AI.
    Keywords: Artificial Intelligence,Innovation,CIS data,Germany
    JEL: O14 O31 O32 O33 L25 M15
    Date: 2021
  2. By: Giacomo Damioli (European Commission, Joint Research Centre, Ispra, Italy); Vincent Van Roy (European Commission, Joint Research Centre, Seville, Spain); Daniel Vertesy (International Telecommunication Union, Geneva, Switzerland – UNU-MERIT, Maastricht, The Netherlands); Marco Vivarelli (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore – UNU-MERIT, Maastricht, The Netherlands – IZA, Bonn, Germany)
    Abstract: This study investigates the possible job-creation impact of AI technologies, focusing on the supply side, namely the providers of the new knowledge base. The empirical analysis is based on a worldwide longitudinal dataset of 3,500 front-runner companies that patented the relevant technologies over the period 2000-2016. Obtained from GMM-SYS estimates, our results show a positive and significant impact of AI patent families on employment, supporting the labour-friendly nature of product innovation in the AI supply industries. However, this effect is small in magnitude and limited to service sectors and younger firms, which are the leading actors of the AI revolution. Finally, some evidence of increasing returns seems to emerge; indeed, the innovative companies which are more focused on AI technologies are those obtaining the larger impacts in terms of job creation.
    Keywords: Innovation, technological change, patents, employment, job-creation
    JEL: O33
    Date: 2021–04
  3. By: Fabian Stephany; Hanno Lorenz
    Abstract: The uniqueness of human labour is at question in times of smart technologies. The 250 years-old discussion on technological unemployment reawakens. Prominently, Frey and Osborne (2017) estimated that half of US employment will be automated by algorithms within the next 20 years. Other follow-up studies conclude that only a small fraction of workers will be replaced by digital technologies. The main contribution of our work is to show that the diversity of previous findings regarding the degree of job automation is, to a large extent, driven by model selection and not by controlling for personal characteristics or tasks. For our case study, we consult experts in machine learning and industry professionals on the susceptibility to digital technologies in the Austrian labour market. Our results indicate that, while clerical computer-based routine jobs are likely to change in the next decade, professional activities, such as the processing of complex information, are less prone to digital change.
    Date: 2021–04
  4. By: Antoine Dechezleprêtre; David Hémous; Morten Olsen; Carlo Zanella
    Abstract: Do higher wages lead to more automation innovation? To answer this question, we first use the frequency of certain keywords in patent text to create a new measure of automation innovation in machinery. We show that our measure is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of low- and high-skill wages. In a firm-level panel analysis, we find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 5. Placebo regressions show that the effect is specific to automation innovations. Finally, we focus on a specific labor market shock, the German Hartz reforms, and show that they reduced automation innovations by those non-German firms relatively more exposed to Germany.
    Keywords: Automation, innovation, patents, income inequality
    JEL: O31 O33 J20
    Date: 2021–04
  5. By: Joël Cariolle (FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Maëlan Le Goff (Banque de France - Banque de France - Banque de France)
    Abstract: In this paper, we study the spatial spillover effects of internet usage on manufacturing output. Using repeated cross-section datasets of 40,154 manufacturing firms located in 91 developing and transition economies, we adopt an original shift-share instrumental variable setup , and find that a greater diffusion of email technology in locations increases manufacturing firm's sales and productivity. This result is driven by local email dissemination within industries, supporting the existence of network or knowledge spillover effects among proximate firms, engaged in similar or interlinked activities. By contrast, the dissemination of email technology across other industries located in the same place reduces manufacturing firms' performance. However, these inter-industry spillovers are U-shaped, indicating that they remain negative below a local email incidence threshold established at approximately 50% of the local universe of firms, and turn positive only once this threshold is reached. Last, we find that positive Internet spillovers are mediated by firm's own use of the internet technology, and by its absorptive capacity, reflected by its share of skilled production workers, its multi-plant status, and its maturity.
    Keywords: Connectivity,internet,spillovers,manufactures,industrialisation
    Date: 2021–04–14
  6. By: Jan Fagerberg (Center for Technology, Innovation and Culture, University of Oslo)
    Abstract: This paper focuses on the role of demand-oriented innovation policies in supporting the global green shift. Three specific cases, all from Europe, in which change has been very quick indeed, are considered: Wind energy in Denmark, the German Energiewende and electrical cars in Norway. The emphasis is particularly on the nature of the policies that were adopted, how they came about, and their impacts on a national as well as global scale. It is shown that demand-oriented innovation policies played a decisive role in all three cases and contributed to encourage (green) innovation, create new jobs and significantly speed up the transition. Moreover, these policies had very important global repercussions.
    Date: 2021–04
  7. By: Franz Tödtling (Vienna University of Economics and Business); Michaela Trippl (University of Vienna); Veronika Desch (University of Vienna)
    Abstract: The regional innovation system (RIS) approach has become a widely used framework for examining the dynamics of innovation across space as well as for crafting policies aimed at promoting the innovation capacity of regions. The dominant focus of RIS studies and regional innovation policies has been on technological innovation that drives competitiveness and economic growth. In light of persistent environmental and social challenges such as climate change, health problems, and growing inequalities, this narrow understanding of innovation appears to be obsolete. This article claims that the RIS approach requires critical rethinking and reassessment to provide a solid basis for informing the next generation of regional innovation policies. We explore how RIS scholarship and policies could benefit from engaging more deeply with an alternative understanding of innovation. Inspired by recent work on responsible innovation, mission-oriented and transformative innovation policies, we develop the notion of ‘challenge-oriented RIS’ (CORIS). In contrast to conventional understandings of RIS, this approach embraces a broader and more critical understanding of innovation, captures the directionality of change, opens up to new innovation actors and novel coordination mechanisms between various stakeholders and territorial scales, and pays more attention to the application side and upscaling of innovation within the region and beyond. Acknowledging that regions vary in their capacity to fashion transformative change and challenge-oriented innovation, the paper outlines new directions for place-based innovation policies.
    Keywords: regional innovation systems, grand societal challenges, sustainability transitions, challenge-oriented regional innovation policy
    Date: 2021
  8. By: Gert Bijnens (Economics and Research Department, NBB and KULeuven); John Hutchinson (European Central Bank); Jozef Konings (KULeuven, University of Liverpool and Nazarbayev University); Arthur Saint Guilhem (European Central Bank)
    Abstract: Increased investment in clean electricity generation or the introduction of a carbon tax will most likely lead to higher electricity prices. We examine the effect from changing electricity prices on manufacturing employment. Analyzing firm-level data, we find that rising electricity prices lead to a negative impact on labor demand and investment in sectors most reliant on electricity as an input factor. Since these sectors are unevenly spread across countries and regions, the labor impact will also be unevenly spread with the highest impact in Southern Germany and Northern Italy. We also identify an additional channel that leads to heterogeneous responses. When electricity prices rise, financially constrained firms reduce employment more than less constrained firms. This implies a potentially mitigating role for monetary policy.
    Keywords: environmental regulation, labor demand, employment, manufacturing industry, monetary policy
    JEL: E52 H23 J23 Q48
    Date: 2021–04
  9. By: Saptorshee Kanto Chakraborty (Paris School of Economics); Massimiliano Mazzanti (University of Ferrara; SEEDS, Italy)
    Abstract: Renewable electricity is a pillar of the sustainability transition being pursued through climate and energy policy strategies, and the European Green Deal represents a potential investment plan for this new phase of development. Economic growth can be inƒfluenced by the expansion of renewable electricity consumption, but the nature of their relationship is ambiguous and depends on various economic and policy factors. Th‘is paper investigates the long-run relationship between renewable electricity consumption and economic growth in selected countries over the period 1971-2015 using econometric panel data techniques that specifi€cally address cross-country heterogeneity and cross-sectional dependence. Our fi€ndings suggest that, on average, there is a signi€cant positive long-term relationship between renewable electricity consumption and economic growth, although Granger causality is not detected. Regarding causality, we do fi€nd per capita economic growth to be a causal factor for total electricity consumption.
    Keywords: Electricity Consumption, Economic Growth, Renewables, Cross-sectional Dependence, CS-ARDL Model, CS-DL Model
    Date: 2021–04
  10. By: Klein, Michael A
    Abstract: I develop a general equilibrium model of endogenous growth to jointly analyze two distinct theories of the patent system’s social value: (1) that patents stimulate innovation by enhancing private incentives to invest in R&D (reward theory) and (2) that patents disseminate technical information into the public domain through disclosure requirements (contract theory). The model features endogenous innovator selection into patents versus secrecy based on heterogenous innovation size, the effective cost of disclosure, and expected licensing revenue from holding a patent. Innovation is cumulative, patent rights overlap across industries, and new innovator’s pay mandatory licensing fees to a subset of previous innovators if those innovators hold a patent. The economy’s endogenous patent propensity determines each new innovator’s licensing burden, consistent with the concept of patent thickets. The model captures the inherent tension between the two objectives of the patent system and highlights novel, competing effects of patent policy on both economic growth and social welfare.
    Keywords: Innovation; Patent policy; Patent thickets; Trade secrets; Endogenous growth
    JEL: O31 O34 O43
    Date: 2021–04–30
  11. By: Ronald B. Davies; Ryan M. Hynes; Dieter Franz Kogler
    Abstract: Patent boxes significantly reduce the corporate tax rate applied to income earned from a patent. This incentivizes firms to increase the likelihood of a patent application being granted by creating more novel research and using more successful legal representation when filing the application. Conversely, it supports submitting applications for marginally novel innovations that otherwise would not have been submitted, lowering the probability of success. We use data from applications to the European Patent Office from 1978 to 2019 and find that the introduction of a patent box increases the average success rate of applications from large, corporate innovators by 6.9 percentage points. This impact only materializes two years after a patent box takes effect, suggesting that improved research effort is the dominant response by firms. Therefore patent boxes may help to increase innovation novelty and improve the overall quality of research.
    Keywords: Patent Box; Patents; Application Success; Corporate Taxation
    JEL: H25 O31 O32
    Date: 2021–04
  12. By: George A. Alessandria; Robert C. Johnson; Kei-Mu Yi
    Abstract: This paper surveys macroeconomic and microeconomic perspectives on the role of international trade in structural transformation. We start by describing canonical frameworks that have been used to quantify how trade influences sectoral shares of employment and value added. We then pivot to survey micro-empirical evidence on the impact of changes in trade on the allocation of labor across sectors and productivity at the firm level. In this, we put special emphasis on the role of participation in global value chains and inward foreign direct investment in mediating these effects. Next, we evaluate evidence on the barriers to trade faced by low-income countries, with special attention to recent work that measures these costs taking firm dynamics into account. We conclude by discussing how these micro-perspectives can be integrated into macro-models to advance our understanding of structural change.
    JEL: F1 F43 O11 O4
    Date: 2021–04
  13. By: Giammario Impullitti; Omar Licandro; Pontus Rendahl
    Abstract: We study the gains from trade in a model with oligopolistic competition, heterogeneous firms and innovation, and provide a formula to decompose the mechanism. The new insight we provide is that market concentration can be a welfare-relevant feature of market power above and beyond markup dispersion. Trade liberalisation increases foreign competition and reduces the number of active firms in the market, thereby increasing concentration. A more concentrated economy is more efficient due to increasing returns in production. Moreover, higher concentration produces a scale effect on firms’ incentives to innovate, which increases welfare via productivity improvements. In the calibrated version of the model we show that a trade-induced increase in concentration contributes substantially to the gains from trade, mostly via its stimulating effect on innovation. Sizeable gains also come from the reduction of the inefficiency produced by trade in identical goods; i.e. through a reduction in reciprocal dumping. Changes in markup dispersion, in contrast, have only negligible effects.
    Keywords: gains from trade, heterogeneous firms, oligopoly, innovation, endogenous markups, market concentration
    JEL: F12 F13 O31 O41
    Date: 2021
  14. By: Makoto Yano (Institute of Economic Reserch, Kyoto University and RIETI); Yuichi Furukawa (Aichi University and RIETI)
    Abstract: Between the 1760s and 1980s, we have experienced at least three industrial revolutions. We explain such cycles as ergodic chaos and relate it to the average long-run interest rate and intellectual property protection. Because innovation dynamics is intrinsically multi-dimensional, we need newly to develop a structural characterization of multi-dimensional ergodic chaos suitable for an economic analysis. Introducing such a characterization for the two-dimensional case, we show that if the monopolistic use of a new invention lasts eight years, an industrial-revolution-like burst of new technologies recurs about every one hundred years, given empirically reasonable values of the determinants of a long-run interest rate.
    Keywords: industrial revolutions, chaotic cycles, intellectual properties, market quality dynamics
    JEL: C62 E32 O41
    Date: 2021–03

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