nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2021‒11‒29
eighteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Profit taxation, R&D spending, and innovation By Lichter, Andreas; Löffler, Max; Isphording, Ingo Eduard; Nguyen, Thu-Van; Poege, Felix; Siegloch, Sebastian
  2. Innovation pattern heterogeneity: A data-driven retrieval of the firms' approaches to innovation By Marco Capasso; Marina Rybalka
  3. Productivity Convergence in Manufacturing: A Hierarchical Panel Data Approach By Guohua Feng; Jiti Gao; Bin Peng
  4. The Impact of Environmental Policy on Innovation in Clean Technologies By Johannes Eugster
  5. News from the frontier: Increased productivity dispersion across firms and factor reallocation By Paul Bouche; Gilbert Cette; Rémy Lecat
  6. Misappropriation of R&D subsidies: Estimating treatment effects with one-sided noncompliance By Boeing, Philipp; Peters, Bettina
  7. Can International Technological Diffusion Substitute for Coordinated Global Policies to Mitigate Climate Change? By Mr. Philip Barrett
  8. Firm Size and the Task Content of Jobs: Evidence from 47 Countries By De Vera, Micole; Garcia-Brazales, Javier
  9. Financial Constraints for R&D and Innovation: New Evidence from a Survey Experiment By Dirk Czarnitzki; Marek Giebel
  10. Aggregate dynamics and microeconomic heterogeneity: the role of vintage technology. By Giuseppe Fiori; Filippo Scoccianti
  11. Winner Takes All? Tech Clusters, Population Centers, and the Spatial Transformation of U.S. Invention By Brad Chattergoon; William R. Kerr
  12. AI-tocracy By Martin Beraja; Andrew Kao; David Y. Yang; Noam Yuchtman
  13. Labour-saving automation and occupational exposure: a text-similarity measure By Fabio Montobbio; Jacopo Staccioli; Maria Enrica Virgillito; Marco Vivarelli
  14. Firm-Level Upgrading in Developing Countries By Eric Verhoogen
  15. The Role of Global Value Chains in Carbon Intensity Convergence: A Spatial Econometrics Approach By Kazem Biabany Khameneh; Reza Najarzadeh; Hassan Dargahi; Lotfali Agheli
  16. Participation in Global Value Chains: The impact of distance and national transportation systems By Bergantino, Angela Stefania; Spiru, Ada
  17. Coevolution of Job Automation Risk and Workplace Governance By Belloc, Filippo; Burdin, Gabriel; Cattani, Luca; Ellis, William; Landini, Fabio
  18. Regional differences in productivity in Sweden: Insights from OECD regions By Christophe André; Mathilde Pak

  1. By: Lichter, Andreas; Löffler, Max; Isphording, Ingo Eduard; Nguyen, Thu-Van; Poege, Felix; Siegloch, Sebastian
    Abstract: We study how profit taxation affects plants' R&D spending and innovation activities. Relying on geocoded survey panel data which approximately covers the universe of R&D-active plants in Germany, we exploit around 7,300 changes in the municipal business tax rate over the period 1987-2013 for identification. Applying event study models, we find a negative and statistically significant effect of an increase in profit taxation on plants' R&D spending with an implied long-run elasticity of 􀀀1.25. Reductions in R&D are particularly strong among more credit-constrained plants. In contrast, homogeneity of effects across the plant size distribution questions policy makers common practice to link targeted R&D tax incentives to plant size. We further find lagged negative effects on the (citation-weighted) number of filed patents.
    Keywords: corporate taxation,firms,R&D,innovation,patents
    JEL: H25 H32 O31 O32
    Date: 2021
  2. By: Marco Capasso; Marina Rybalka
    Abstract: Innovation is one of the usual suspects in defining differences in performance among firms, according to a strong and diverse theoretical framework. Understanding the diversity that exists within the population of innovative firms is essential to elaborate appropriate innovation policies. Our study explores the diversity of innovation patterns among Norwegian firms included in the 2018 Community innovation survey (CIS2018). By applying factor analysis on a wide array of survey variables and on a large sample of firms, we identify eleven typical approaches to innovation, which recurrently connect innovation inputs and outputs at firm level. A main outcome of our study is a renewed fine-grained view on innovation as a multifaceted concept.
    Keywords: Technological change; Innovation survey; Factor analysis; Business strategies; Intra-industry heterogeneity.
    Date: 2021–11–07
  3. By: Guohua Feng; Jiti Gao; Bin Peng
    Abstract: Despite its paramount importance in the empirical growth literature, productivity convergence analysis has three problems that have yet to be resolved: (1) little attempt has been made to explore the hierarchical structure of industry-level datasets; (2) industry-level technology heterogeneity has largely been ignored; and (3) cross-sectional dependence has rarely been allowed for. This paper aims to address these three problems within a hierarchical panel data framework. We propose an estimation procedure and then derive the corresponding asymptotic theory. Finally, we apply the framework to a dataset of 23 manufacturing industries from a wide range of countries over the period 1963-2018. Our results show that both the manufacturing industry as a whole and individual manufacturing industries at the ISIC two-digit level exhibit strong conditional convergence in labour productivity, but not unconditional convergence. In addition, our results show that both global and industry-specific shocks are important in explaining the convergence behaviours of the manufacturing industries.
    Date: 2021–10
  4. By: Johannes Eugster
    Abstract: This paper studies the effect of climate change mitigating policies on innovation in clean energy technologies. Results suggest that the tightening of environmental policies since the early 1990s have made a statistically and economically significant contribution to the increase in clean innovation. These effects generally materialized quickly, within 2 to 3 years of the policy change, and were driven by individually significant marginal effects of both market-based policies – such as feed-in tariffs and trading schemes – as well as non-market policies, such as R&D subsidies or emission limits. Looking at electricity innovation in particular, the paper finds that the estimated effect on total innovation is positive on net, meaning that increased innovation in clean and grey technologies is not offset by a decrease in innovation in dirty technologies. From a policy point of view, the paper’s results call for strong policy efforts to decisively shift innovation towards clean technologies.
    Keywords: Climate change mitigation, innovation, environmental policies; policy point of view; effect of climate change; climate change mitigation; policy effort; policy tool; Environmental policy; Electricity; Climate policy; Renewable energy; Global
    Date: 2021–08–06
  5. By: Paul Bouche; Gilbert Cette; Rémy Lecat
    Abstract: Analysing French firms over 1991-2016, we find first that since the beginning of the century, one or two downward significant productivity breaks have occurred in all industries, both at the frontier and for laggard firms, suggesting a decline in the contribution of technological progress to productivity growth. Second, the median labour share is always higher for the laggard firms than for the frontier firms, with a sharp decrease from the mid-1990s to 2008, and an increase from 2008 onwards. Third, factor reallocation decreased significantly in the 2000s, at the time when we observed an increase in productivity dispersion, with a growing productivity gap between frontier and laggard firms. It appears also that reallocation has been lower on average over the whole period for sectors with a high import share, which can be related to the impact of global value chains.
    Keywords: Productivity, Frontier Firms, Reallocation
    JEL: D24 E24 J23 L25
    Date: 2021
  6. By: Boeing, Philipp; Peters, Bettina
    Abstract: In evaluating the effectiveness of R&D subsidies, the literature has focused on potential crowding out effects, while the possibility of misappropriation of public funds that results from moral hazard behavior has been completely neglected. This study develops a theoretical framework with which to identify misappropriation. Using Chinese firm-level data for the period 2001-2011, we show that misappropriation is a major threat. 42% of grantees misused R&D subsidies for non-research purposes, accounting for 53% of the total amount of R&D subsidies. In a second step, we study the loss of effectiveness of R&D subsidies in stimulating R&D expenditures that is due to misappropriation. We measure the loss in effectiveness by estimating the causal effect of R&D subsidies in the presence of misappropriation using an intention-to-treat (ITT) estimator and comparing it to the ideal situation (without misappropriation) using the complier average causal effect (CACE). We find that China's R&D policy could have been more than twice as effective in boosting R&D without misappropriation. R&D expenditures could have been stimulated beyond the subsidy amount (additionality), but noncompliant behavior has resulted in a moderately strong partial crowding out effect. We find significant treatment heterogeneity by period, subsidy size, industry, and ownership. Notably, the loss in effectiveness has diminished following a policy reform in 2006. Nevertheless, the misappropriation of public funds considerably undermines the impact of R&D policies in China.
    Keywords: R&D subsidies,misappropriation,China,moral hazard,policy evaluation
    JEL: O31 O38 C21 H21
    Date: 2021
  7. By: Mr. Philip Barrett
    Abstract: In short, yes. I use a multi-region integrated assessment model with fuel-specific endogenous technical change to examine the impact of Europe and China reducing emissions to zero by mid-century. Without international technological diffusion this is insufficient to avoid catastrophic climate change. But when innovation can diffuse overseas, long-run temperature increases are limited to 3 degrees. This occurs because policy not only encourages green innovations but also dissuades dirty innovations which would otherwise spread. The most effective policy package in emissions-reducing regions is a research subsidy funded by a carbon tax, driven in the short term by the direct effect of the carbon tax on the composition of energy, and later by innovation induced by research subsidies. Green production subsidies are ineffective because they undermine incentives for innovation.
    Keywords: research subsidy; policy package; green production subsidy; package in emissions-reducing region; energy-producing firm; Carbon tax; Climate policy; Greenhouse gas emissions; Spillovers; Global; Europe
    Date: 2021–06–25
  8. By: De Vera, Micole; Garcia-Brazales, Javier
    Abstract: Using a mix of household- and employer-based survey data from 47 countries, we provide novel evidence that workers in larger firms perform more non-routine analytical and interpersonal tasks, even within narrowly defined occupations. Moreover, workers in larger firms rely more on the use of information and communications technologies (ICT) to perform these tasks. We also document a 17% wage premium that workers in larger firms enjoy relative to their counterparts in smaller firms. We find evidence that the firm size gradient in the task content of jobs accounts for around 10% of the large firm wage premium.
    Keywords: Tasks,Occupations,Firm size,Cross-country evidence,Wage differential
    JEL: J24 J31 L25
    Date: 2021
  9. By: Dirk Czarnitzki; Marek Giebel
    Abstract: We utilize a new survey experiment to evaluate the existence and degree of financial constraints for R&D in the economy. The experiment does not only allow to deduct the presence of financial constraints, but also to evaluate their economic significance. Using data on German companies, we find that financial constraints for R&D exist but that their relevance might have been overestimated in the literature. Most R&D projects that have not been implemented because of financial constraints turn out to have low expected marginal rates of return. While this findings stands in some contrast to other studies, we also find several results that are in line with the literature: young firms are most constrained and the constraints occur at the intensive margin, i.e. our results do not suggest that non-innovative companies are deterred from innovation. Instead, highly innovative companies are restricted by the capital market.
    Keywords: Innovation, Financial Constraints, Survey Experiment
    Date: 2021–11–18
  10. By: Giuseppe Fiori (Board of Governors of the Federal Reserve System); Filippo Scoccianti (Bank of Italy)
    Abstract: We study how the timing of technology adoption through capital accumulation shapes firm-level productivity dynamics and quantify its aggregate implications in a model of heterogeneous firms. Using data on the census of incorporated Italian firms and exploiting the lumpiness of capital accumulation, we document that large investment episodes lead to productivity gains at the firm and sectoral level due to vintage effects. In a general equilibrium model of firm heterogeneity, we find that the presence of vintage technology constitutes a powerful microeconomic-based amplification mechanism of aggregate shocks relative to a benchmark real business cycle model.
    Keywords: business cycles, (S,s) policies, vintage effects, firm heterogeneity.
    JEL: D24 E22 E32
    Date: 2021–11
  11. By: Brad Chattergoon; William R. Kerr
    Abstract: U.S. invention has become increasingly concentrated around major tech centers since the 1970s, with implications for how much cities across the country share in concomitant local benefits. Is invention becoming a winner-takes-all race? We explore the rising spatial concentration of patents and identify an underlying stability in their distribution. Software patents have exploded to account for about half of patents today, and these patents are highly concentrated in tech centers. Tech centers also account for a growing share of non-software patents, but the reallocation, by contrast, is entirely from the five largest population centers in 1980. Non-software patenting is stable for most cities, with anchor tenants like universities playing important roles, suggesting the growing concentration of invention may be nearing its end. Immigrant inventors and new businesses aided in the spatial transformation.
    JEL: L86 O30 O31 O32 O33 O34 R11 R12
    Date: 2021–11
  12. By: Martin Beraja; Andrew Kao; David Y. Yang; Noam Yuchtman
    Abstract: Can frontier innovation be sustained under autocracy? We argue that innovation and autocracy can be mutually reinforcing when: (i) the new technology bolsters the autocrat’s power; and (ii) the autocrat’s demand for the technology stimulates further innovation in applications beyond those benefiting it directly. We test for such a mutually reinforcing relationship in the context of facial recognition AI in China. To do so, we gather comprehensive data on AI firms and government procurement contracts, as well as on social unrest across China during the last decade. We first show that autocrats benefit from AI: local unrest leads to greater government procurement of facial recognition AI, and increased AI procurement suppresses subsequent unrest. We then show that AI innovation benefits from autocrats’ suppression of unrest: the contracted AI firms innovate more both for the government and commercial markets. Taken together, these results suggest the possibility of sustained AI innovation under the Chinese regime: AI innovation entrenches the regime, and the regime’s investment in AI for political control stimulates further frontier innovation.
    JEL: E00 L5 L63 O25 O30 O40 P00
    Date: 2021–11
  13. By: Fabio Montobbio; Jacopo Staccioli; Maria Enrica Virgillito; Marco Vivarelli
    Abstract: This paper represents one of the first attempts at building a direct measure of occupational exposure to robotic labour-saving technologies. After identifying robotic and labour-saving robotic patents retrieved by Montobbio et al., (2022), the underlying 4-digit CPC definitions are employed in order to detect functions and operations performed by technological artefacts which are more directed to substitute the labour input. This measure allows to obtain fine-grained information on tasks and occupations according to their similarity ranking. Occupational exposure by wage and employment dynamics in the United States is then studied, complemented by investigating industry and geographical penetration rates.
    Keywords: Labour-Saving Technology; Natural Language Processes; Labour Markets; Technological Unemployment.
    Date: 2021–11–23
  14. By: Eric Verhoogen
    Abstract: In principle, firms in developing countries benefit from the fact that advanced technologies and products have already been developed in industrialized countries and can simply be adopted, a process often referred to as industrial upgrading. But for many firms this advantage remains elusive. What is getting in the way? This paper reviews recent firm-level empirical research on the determinants of upgrading in developing countries. The first part focuses on how to define and measure various dimensions of upgrading --- learning, quality upgrading, technology adoption, and product innovation. The second part takes stock of recent micro-empirical evidence on the drivers of upgrading, classifying them as output-side drivers, input-side drivers, or drivers of know-how. The review concludes with some thoughts about promising directions for research in the area.
    JEL: F1 L2 O1
    Date: 2021–11
  15. By: Kazem Biabany Khameneh; Reza Najarzadeh; Hassan Dargahi; Lotfali Agheli
    Abstract: The expansion of trade agreements has provided a potential basis for trade integration and economic convergence of different countries. Moreover, developing and expanding global value chains (GVCs) have provided more opportunities for knowledge and technology spillovers and the potential convergence of production techniques. This can result in conceivable environmental outcomes in developed and developing countries. This study investigates whether GVCs can become a basis for the carbon intensity (CI) convergence of different countries. To answer this question, data from 101 countries from 1997 to 2014 are analyzed using spatial panel data econometrics. The results indicate a spatial correlation between GVCs trade partners in terms of CI growth, and they confirm the GVCs-based conditional CI convergence of the countries. Moreover, estimates indicate that expanding GVCs even stimulates bridging the CI gap between countries, i.e., directly and indirectly through spillover effects. According to the results, GVCs have the potential capacity to improve the effectiveness of carbon efficiency policies. Therefore, different dimensions of GVCs and their benefits should be taken into account when devising environmental policies.
    Date: 2021–10
  16. By: Bergantino, Angela Stefania; Spiru, Ada
    Abstract: Trade is becoming increasingly fragmented and global value chains (GVCs) more complex. Although GVCs are often considered a defining feature of the current wave of globalization, little is known about what drives GVC participation. This yields to the question what separate less successful countries from successful ones. The increased geographic spread of production processes induces an increasing importance of physical transportation of input and output goods. For emerging economies, increasing international trade and enhancing the participation in global value chains (GVC) are high priority objectives (Percoco, 2014; Bensassi et al., 2015; Rao & Dhar, 2018). In order to achieve them it is necessary to improve the national transportation system and its performance as accessibility is considered an important driver of a country’s attractiveness in today’s globalized production network (Memedovic et al., 2008; Bosker and Westbrock, 2014). This work aims to investigate the determinants of the integration in international production networks of both emerging and developed markets in a transport economic perspective. Starting from the assumption that trade between two countries is conditional on several characteristics of the countries involved that can either enhance or hinder bilateral business activities (Zwinkels & Beugelsdijk, 2010), by implementing an augmented gravity equation (Santos Silva and Tenreyro, 2011; Correia et al., 2019), we investigate the role of the national transportation system in moderating the effects of different betweencountry distance dimensions on GVC-related trade flows. We take into consideration, with a trade policy focus, various aspects of “distance”: geographical, institutional, cultural and economic. We argue that additional costs arising from the different distance dimensions are partly moderated by the host country's national transportation system. Using information provided by the World Input-Output Database (WIOD) for the period 2000-2014, integrated with other data sources, we bring empirical evidence in support of the hypothesis that the national transportation system moderates the effects of between-country distances and reduces the “remoteness” of emerging economies in the global production network participation. Physical gravity factors are found to be significant drivers of vertical trade. We also find evidence confirming that the national transportation system plays an important role in determining countries’ vertical trade integration.
    Date: 2021
  17. By: Belloc, Filippo (University of Siena); Burdin, Gabriel (Leeds University Business School); Cattani, Luca (University of Bologna); Ellis, William; Landini, Fabio (University of Parma)
    Abstract: This paper analyzes the interplay between the allocation of authority within firms and workers' exposure to automation risk. We propose an evolutionary model to study the complementary fit of job design and workplace governance as resulting from the adoption of worker voice institutions, in particular employee representation (ER). Two organisational conventions are likely to emerge in our framework: in one, workplace governance is based on ER and job designs have low automation risk; in the other, ER is absent and workers are involved in automation-prone production tasks. Using data from a large sample of European workers, we document that automation risk is negatively associated with the presence of ER, consistently with our theoretical framework. Our analysis helps to rationalize the historical experience of Nordic countries, where simultaneous experimentation with codetermination rights and job enrichment programs has taken place. Policy debates about the consequences of automation on labour organization should avoid technological determinism and devote more attention to socio-institutional factors shaping the future of work.
    Keywords: automation risk, job design, employee representation, evolutionary game
    JEL: O33 J51 C73
    Date: 2021–10
  18. By: Christophe André; Mathilde Pak
    Abstract: Regional inequality has increased in Sweden over the past decades, albeit from a low level. While redistribution and other public policies can narrow regional gaps in income, well-being and access to services, productivity growth is key to maintaining economic dynamism, creating job opportunities and attracting and retaining skilled workers. Against this background, this paper documents the performance of Swedish large regions (TL2) on the main productivity drivers identified by the literature. Panel regressions on a dataset covering up to 125 OECD regions in 17 countries identify the factors associated with high regional productivity, namely rail and road connectivity, knowledge-intensive employment and research and education. Investment in construction and finance is linked to somewhat weaker productivity. Even after taking these factors into account, the Stockholm region benefits from a sizeable productivity advantage, which likely reflects agglomeration effects.
    Keywords: Productivity, Regional development, Regional economic activity, Regional Studies, Sweden
    JEL: O47 P48 R11 R12 R58
    Date: 2021–11–19

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