nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2021‒06‒28
eleven papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Tasks, Automation, and the Rise in US Wage Inequality By Daron Acemoglu; Pascual Restrepo
  2. Technological breakthroughs in European regions: the role of related and unrelated combinations By Ron Boschma; Ernest Miguélez; Rosina Moreno; Diego B. Ocampo-Corrales
  3. Crisis Innovation Policy from World War II to COVID-19 By Daniel P. Gross; Bhaven N. Sampat
  4. Technological Change and Obsolete Skills: Evidence from Men’s Professional Tennis By Ian Fillmore; Jonathan Hall
  5. Open innovation in managerial innovation: the case of internal audit. By Stéphane Lhuillery; Marion Tellechea; Stéphanie Thiery
  6. Trade and Innovation By Marc J. Melitz; Stephen J. Redding
  7. Innovation in Transition countries: the role of training By Antonella Biscione; Chiara Burlina; Raul Caruso; Annunziata de Felice
  8. Targeting R&D intensity in Finnish innovation policy By Matthias Deschryvere; Kai Husso; Arho Suominen
  9. The impact of Covid-19 and of the earlier crisis on firms’ innovation and growth: a comparative analysis By Anabela Santos; Karel Haegeman; Pietro Moncada-Paternó-Castello
  10. Induced Technical Change and Income Distribution: the Role of Public R&D and Labor Market Institutions By Zamparelli, Luca
  11. Technological growth and hours in the long run: Theory and evidence By Reif, Magnus; Tesfaselassie, Mewael F.; Wolters, Maik H.

  1. By: Daron Acemoglu; Pascual Restrepo
    Abstract: We document that between 50% and 70% of changes in the US wage structure over the last four decades are accounted for by the relative wage declines of worker groups specialized in routine tasks in industries experiencing rapid automation. We develop a conceptual framework where tasks across a number of industries are allocated to different types of labor and capital. Automation technologies expand the set of tasks performed by capital, displacing certain worker groups from employment opportunities for which they have comparative advantage. This framework yields a simple equation linking wage changes of a demographic group to the task displacement it experiences. We report robust evidence in favor of this relationship and show that regression models incorporating task displacement explain much of the changes in education differentials between 1980 and 2016. Our task displacement variable captures the effects of automation technologies (and to a lesser degree offshoring) rather than those of rising market power, markups or deunionization, which themselves do not appear to play a major role in US wage inequality. We also propose a methodology for evaluating the full general equilibrium effects of task displacement (which include induced changes in industry composition and ripple effects as tasks are reallocated across different groups). Our quantitative evaluation based on this methodology explains how major changes in wage inequality can go hand-in-hand with modest productivity gains.
    JEL: J23 J31 O33
    Date: 2021–06
  2. By: Ron Boschma; Ernest Miguélez; Rosina Moreno; Diego B. Ocampo-Corrales
    Abstract: This paper analyzes if the emergence and occurrence of breakthrough technologies in 277 European regions in the period 1981 to 2010 is related to the existing technological portfolio of regions. The study shows that, by far, most combinations breakthrough inventions make are between related technologies: almost no breakthrough patent makes combinations between unrelated combinations only. We also find that breakthrough inventions primarily combine and cite technological classes that are present in the region. Regressions show that the occurrence of breakthrough patents in a technology in a region is positively affected by the local stock of technologies that is related to such technology, but we do not find such an effect for the local stock of unrelated technologies, in contrast to studies that suggest otherwise. However, the region’s ability to enter new breakthrough inventions in a technology relies on the combination of knowledge that is both related and unrelated to such technology.
    Keywords: relatedness, unrelatedness, technological breakthroughs, regional diversification, European regions
    JEL: O18 O31 O33 R11
    Date: 2021
  3. By: Daniel P. Gross; Bhaven N. Sampat
    Abstract: Innovation policy can be a crucial component of governments' responses to crises. Because speed is a paramount objective, crisis innovation may also require different policy tools than innovation policy in non-crisis times, raising distinct questions and tradeoffs. In this paper, we survey the U.S. policy response to two crises where innovation was crucial to a resolution: World War II and the COVID-19 pandemic. After providing an overview of the main elements of each of these efforts, we discuss how they compare, and to what degree their differences reflect the nature of the central innovation policy problems and the maturity of the U.S. innovation system. We then explore four key tradeoffs for crisis innovation policy---top-down vs. bottom-up priority setting, concentrated vs. distributed funding, patent policy, and managing disruptions to the innovation system---and provide a logic for policy choices. Finally, we describe the longer-run impacts of the World War II effort and use these lessons to speculate on the potential long-run effects of the COVID-19 crisis on innovation policy and the innovation system.
    JEL: H12 H56 I18 N42 N72 O31 O32 O38
    Date: 2021–06
  4. By: Ian Fillmore (Washington University in St. Louis); Jonathan Hall (University of Toronto)
    Abstract: Technological innovation can raise the returns to some skills while making others less valuable or even obsolete. We study the effects of such skill-altering technological change in the context of men’s professional tennis, which was unexpectedly transformed by the invention of composite racquets during the late 1970s. We explore the consequences of this innovation on player productivity, entry, and exit. We find that young players benefited at the expense of older players and that the disruptive effects of the new racquets persisted over two to four generations.
    Keywords: technological change, human capital, tennis
    JEL: J24 O33 Z22
    Date: 2021–06
  5. By: Stéphane Lhuillery; Marion Tellechea; Stéphanie Thiery
    Abstract: Research on innovation has grown into a substantial body of literature and has drawn attention to knowledge sources. However, little is known about the drivers of audit innovation. This article seeks to identify, delineate and categorize knowledge sources’ impact on internal audit innovation. We implement an econometric model and find that internal audit departments developing search capabilities to modify their processes can innovate in their practices. Using the original measures of internal search capabilities and innovation, our findings highlight the effects of search, intrafirm and external knowledge sources on internal audit innovation: among intrafirm knowledge sources, management’s reviews of internal audit functions are key factors that foster innovation. Among external sources, professional associations play a prominent role in firms’ propensity to innovate. Most noticeably, firms with high absorptive capabilities deliberately deviate from compliance to innovate using professional associations’ and ICT consultants’ knowledge. Our study contributes to the literature on open innovation and auditing by illuminating internal audit functions’ innovative potential.
    Keywords: internal audit; open innovation; search; internal knowledge sources; external knowledge sources; absorptive capacity.
    JEL: O3
    Date: 2021
  6. By: Marc J. Melitz; Stephen J. Redding
    Abstract: Two central insights from the Schumpeterian approach to innovation and growth are that the pace of innovation is endogenously determined by the expectation of future profits and that growth is inherently a process of creative destruction. As international trade is a key determinant of firm profitability and survival, it is natural to expect it to play a key role in shaping both incentives to innovate and the rate of creative destruction. In this paper, we review the theoretical and empirical literature on trade and innovation. We highlight four key mechanisms through which international trade affects endogenous innovation and growth: (i) market size; (ii) competition; (iii) comparative advantage; (iv) knowledge spillovers. Each of these mechanisms offers a potential source of dynamic welfare gains in addition to the static welfare gains from trade from conventional trade theory. Recent research has suggested that these dynamic welfare gains from trade can be substantial relative to their static counterparts. Discriminating between alternative mechanisms for these dynamic welfare gains and strengthening the evidence on their quantitative magnitude remain exciting areas of ongoing research.
    JEL: F1 F43 O4
    Date: 2021–06
  7. By: Antonella Biscione (CESPIC, Catholic University Our Lady of Good Counsel); Chiara Burlina (Gran Sasso Science Institute (GSSI)); Raul Caruso (Department of Economic Policy and CSEA, Università Cattolica del Sacro Cuore, CESPIC Catholic University “Our Lady of Good Counsel”); Annunziata de Felice (Department of Law, University of Bari Aldo Moro)
    Abstract: This paper analyses the effect of different training programs on the firms’ innovation activities of 27 transition economies. Despite the ongoing debate on training and its effects on innovation, there are no previous studies investigating the role of different typologies of training. The results of the cross-country analysis show a positive relation between definite training and propensity to innovate, controlling several firms’ characteristics such as size, presence of females in the board, personnel’s education and managers’ past experience. We also find a positive effect when considering other definitions of training (problem solving, commercial, managerial, or on-the-job vs. in-class), thus suggesting the need for policy makers and practitioners to invest in ad-hoc training programs to foster innovation in transition economies.
    Keywords: Transition Economies; Innovation; Training
    JEL: O14 O32 P27 P36
    Date: 2021–04
  8. By: Matthias Deschryvere (VTT Technical Research Centre of Finland); Kai Husso (Ministry of Economic Affairs and Employment of Finland); Arho Suominen (VTT Technical Research Centre of Finland)
    Abstract: Finland has been setting research and development (R&D) intensity targets for almost 50 years. This paper explores the Finnish national policy experience in fostering public and private investments in R&D. Three key insights are the following: a) a systemic and integrated policy approach needs an impactful co-ordination and governance mechanism; b) a balanced innovation system with well-working joint public-private partnership efforts and mechanisms will do better in absorbing shocks; c) a key strategy to absorb shocks to the economy and society is to invest in long-term capabilities. This study also provides an overview of the factors influencing the level of R&D intensity. The current 4% target to be reached by 2030 was set in 2019 but thus far relatively few policy actions have been introduced to operationalise it. With these dynamics and uncertainty, it remains to be seen if the target will be reached by 2030.
    Keywords: innovation policy, R&D intensity targets, R&D policy, research and development (R&D)
    JEL: L52 O30 O38
    Date: 2021–06–28
  9. By: Anabela Santos (European Commission - JRC); Karel Haegeman (European Commission - JRC); Pietro Moncada-Paternó-Castello (European Commission - JRC)
    Abstract: Using the results of the Survey on the Access to Finance of Enterprises (2009 to 2020 editions), this paper aims to assess the effect of Covid-19 pandemic on the probabilities of firm to innovate and grow and to compare their likelihood with that of the previous downturn. To control for a possible endogeneity bias as part of innovation decisions a Recursive Bivariate Probit Model is used. Results show that the probabilities of firms to innovate and grow are lower in 2020 (Covid-19 crisis) than in 2009 (financial crisis). The economic performance of innovative firms was also affected by the pandemic, but considerably less than the performance of non-innovative ones. Changes in the innovation patterns are also observed. Possible implications for decision-makers are derived.
    Keywords: Innovation; Growth; COVID-19; Europe.
    JEL: O31 O12 O52
    Date: 2021–06
  10. By: Zamparelli, Luca
    Abstract: This paper investigates the role of public R&D and labor market institutions in a labor constrained Classical growth model with induced technical change. It assumes that the innovation possibility frontier is a positive function of public R&D investment and a negative function of a measure of conflict in the labor market. It shows that while a larger size of the public sector and more peaceful industrial relations unequivocally boost long run growth, the effect on income distribution is not obvious. It depends on how the state of the labor market and public research affect the trade-off between labor and capital productivity growth, that is the slope of the innovation possibility frontier. While it appears plausible that a stronger workers' bargaining power may increase the wage share, higher public R&D investments will not affect income distribution unless it is biased toward either labor- or capital- saving innovations.
    Keywords: induced innovation, public R&D, labor market institutions
    JEL: D33 O31
    Date: 2021–06–23
  11. By: Reif, Magnus; Tesfaselassie, Mewael F.; Wolters, Maik H.
    Abstract: Over the last decades, hours worked per capita have declined substantially in many OECD economies. Using the standard neoclassical growth model with endogenous work-leisure choice, we assess the role of trend growth slowdown in accounting for the decline in hours worked. In the model, a permanent reduction in technological growth decreases steady state hours worked by increasing the consumption-output ratio. Our empirical analysis exploits cross-country variation in the timing and the size of the decline in technological growth to show that technological growth has a highly significant positive effect on hours. A decline in the long-run trend of technological growth by one percentage point is associated with a decline in trend hours worked in the range of one to three percent. This result is robust to controlling for taxes, which have been found in previous studies to be an important determinant of hours. Our empirical finding is quantitatively in line with the one implied by a calibrated version of the model, though evidence for the model's implication that the effect on hours works via changes in the consumption-output ratio is rather mixed.
    Keywords: Productivity growth,technological growth,working hours,employment
    JEL: E24 O40
    Date: 2021

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