nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2022‒01‒17
fifteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Specialize or diversify? And in What? Trade composition, quality of specialization and persistent growth By Giovanni Dosi; Federico Riccio; Maria Enrica Virgillito
  2. Efficient Innovation Policy Increases High-productivity R&D Work By Einiö, Elias; Koski, Heli; Kuusi, Tero; Lehmus, Markku
  3. The polarisation of Italian metropolitan areas, 2000-2018: structural change, technology and growth By Giuseppe Simone
  4. Labour-Saving Automation and Occupational Exposure: A Text-Similarity Measure By Montobbio, Fabio; Staccioli, Jacopo; Virgillito, Maria Enrica; Vivarelli, Marco
  5. Effects of Policy Reforms on Firm Innovation By Murat Seker; Mehmet Fatih Ulu
  6. Complexity and Productive Structure in Latin America: A Network Analysis of Trade Patterns By Calzada, BCO; Spinola, Danilo
  7. The Impact of Mobile Phone Adoption on Income Inequality By Li, Shiyuan; Li, Yumin
  8. Can Artificial Intelligence Reduce Regional Inequality? Evidence from China By Li, Shiyuan; Hao, Miao
  9. Broadband Internet and Social Capital By Geraci, Andrea; Nardotto, Mattia; Reggiani, Tommaso; Sabatini, Fabio
  10. Several Modes of Digitalization of Value Chains and Implications for Entrepreneurship: The Case of the Apparel Industry By Tri VuPhu; Keun Lee; Donghyun Park
  11. Hiring entrepreneurs for innovation By Louise Lindbjerg; Theodor Vladasel
  12. Bridging the short-term and long-term dynamics of economic structural change By Andres Gomez-Lievano; Frank Neffke; Yang Li; James McNerney
  13. How does environmental regulation affect firm innovation? Evidence based on corporate life cycle By Hao, Miao; Lyv, Kangjuan; Li, Shiyuan; Hu, Wuyang
  14. Identifying literacy and numeracy skill mismatch in OECD countries using the job analysis method By Pérez Rodríguez, Sandra; van der Velden, Rolf; Huijts, Tim; Jacobs, Babs
  15. Reporting regulation and corporate innovation By Breuer, Matthias; Leuz, Christian; Vanhaverbeke, Steven

  1. By: Giovanni Dosi; Federico Riccio; Maria Enrica Virgillito
    Abstract: This paper, using a long-term, product-level cross-country dataset, analyzes the trade-growth nexus by introducing two novel indicators able to capture demand and supply attributes of countries' quality of specialization. The Keynesian efficiency index measures demand attractiveness of the export baskets, estimating product-level demand elasticities and weighting them by diversification; the Schumpeterian efficiency index tracks the export basket' technological dynamism proxied by product-level patent intensities. These two dimensions of quality of specialization are effective in explaining the rate and volatility of growth and the duration of growth episodes, identified as periods longer than 8 years of 2% average growth and, even more, of exceptional growth episodes (>=5%). Our results, robust to a wide range of control variables, suggest that specialization per se' is detrimental for growth resilience while countries with a diversified export structure, specialised either in demand-elastic and technological-dynamic productions are likely to experience longer growth episodes.
    Keywords: Structural Change; International Trade; Growth Episodes.
    Date: 2022–01–04
  2. By: Einiö, Elias; Koski, Heli; Kuusi, Tero; Lehmus, Markku
    Abstract: Abstract Our work applies the model developed by Acemoglu et al. (2018), henceforth, AAABK, for assessing the growth and welfare implications of different types of innovation policies. Central to the AAABK model is the ratio of high-productivity and low-productivity firms in total output and how different policy measures affect this relationship. We employ the AAABK framework to build a macroeconomic model of the innovative business sector in Finland and fit it to the company-level micro-data on Finnish companies from 2000 to 2016. We find that, generally, increasing R&D subsidies would be a recommendable policy in Finland. The welfare impacts of R&D subsidies are highest when they accelerate the re-allocation of R&D workers to companies with high R&D productivity. The most effective innovation policy targets R&D subsidies to companies with the highest innovation capacity (i.e., in these companies, R&D employees generate the highest increase in a firm’s productivity). If subsidies are allocated to companies with low innovation capacity or to low-productivity companies that are close to exiting the market, there will be less innovation and slower economic growth. An optimal subsidy policy would drive incumbents with low R&D productivity to exit.
    Keywords: Business subsidies, Innovation, Innovation policy, Growth, Growth models
    JEL: D21 D24 H25 L52 O31 O34
    Date: 2022–01–13
  3. By: Giuseppe Simone
    Abstract: Large cities are a key driver of technological innovation and economic growth. This paper investigates the developments of Italian metropolitan areas, building on insights from economic geography and innovation studies. The key questions to be investigated are the following: a) Which trajectories of population and economic change can be identified for Italian metropolitan areas? Are we facing a process of economic and technological polarisation that may worsen the country’s imbalances? b) What is the role played in such developments by technological and structural change, and in particular by digital technologies and the rise of finance? The empirical analysis investigates the patterns of technological and economic indicators for the period 2000-2018 for 14 Italian metropolitan areas – proxied by their provinces -, providing evidence of growing polarisation between Milan, where most positive developments are concentrated, and the other metropolitan zones. Rome has been losing ground in most fields; Venice and Genoa are characterised by industrial decline. Few mid-sized cities show some economic dynamism – including Bologna and Cagliari - while most southern and insular Italian cities increase their gap relative to the performances of leading metropolitan areas.
    Keywords: urban economics, statistical methods, economic polarization, metropolitan areas, divergence.
    JEL: C10 O14 R11
    Date: 2021–11
  4. By: Montobbio, Fabio (Università Cattolica del Sacro Cuore); Staccioli, Jacopo (Università Cattolica del Sacro Cuore); Virgillito, Maria Enrica (Università Cattolica del Sacro Cuore); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    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 LS 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
    JEL: O33 J24
    Date: 2021–12
  5. By: Murat Seker (Turkish Airlines Headquarter, Istanbul); Mehmet Fatih Ulu (Koc University, Istanbul)
    Abstract: The regulatory environment in a country is an important factor that affects firm performance. This study investigates the impact of a particular regulation – license requirements for certain firm activities – on the innovation performance of Indian firms in the 1990s. Using a unique firm-level panel data set, it shows that the removal of license requirements led to an eight percentage points higher innovation rate within two years following the reform. We measure innovation as the introduction of new product varieties that had not been produced by the firm before. It takes a longer time for firms to innovate in industries in which they were not producing before. The conclusions in this study are also robust to the inclusion of controls for other policy reforms that occurred during the period of licensing reform. They also persist in tests with different subgroups of firms and with the use of alternative estimation methods.
    Keywords: Innovation, research and development, regulatory environment, regulations, industrial policy, India.
    JEL: L11 L52 O14 O31 O3
    Date: 2022–01
  6. By: Calzada, BCO; Spinola, Danilo
    Abstract: While plenty of existing literature focuses on Latin America’s trade relations with key partners, i.e. the US and China, and on its insertion into global value chains, intra-regional trade networks remain understudied. In this paper, we contribute to the understanding of the latter by looking at trade patterns in the region, focusing on how balanced and unbalanced trade occurs among Latin American countries and selected trade partners. We first develop an Index of Modern Balanced Trade (IMBT) that identifies balanced trade relations based on the share of complex goods that is exported and imported among two countries using data from the Observatory of Economic Complexity (Hausmann & Hidalgo, 2014). Based on the IMBT, we then build two types of networks (Balanced and Unbalanced Trade Networks) in three different years that represent specific moments in Latin American economic history. We find that, as expected, most Latin American countries’ relations with partners outside the region remain largely unbalanced. However, our results also show that the Balanced Trade Network within the region has steadily expanded.
    Keywords: Latin America; Trade Integration; Network Analysis; Economic Complexity.
    Date: 2022–01–10
  7. By: Li, Shiyuan; Li, Yumin
    Abstract: Income inequality could lead to weaker economic performance, and there is no consensus on how innovations could affect income inequality. In this paper, we use cross-country panel data to examine the relationship between telecommunications innovation, income inequality, and unemployment. We find different correlations between different levels of technological innovation and income inequality. Our study shows that the spread of 3G communication technologies has little impact on income inequality, while the spread of 4G communication technologies has significantly increased national income inequality. Moreover, the empirical results are robust to various measures of inequality. Finally, 3G communication technologies create far fewer new jobs than jobs displaced by automation, thus increasing unemployment levels. 4G communication technologies create more new jobs, thus reducing unemployment and increasing inequality.
    Keywords: Telecommunication Innovation; Inequality; Unemployment
    JEL: D63 L96 Q55
    Date: 2021–12
  8. By: Li, Shiyuan; Hao, Miao
    Abstract: Based on the analysis of provincial-level data from 2001 to 2015, we find that regional inequality in China is not optimistic. Whether artificial intelligence, as a major technological change, will improve or worsen regional inequality is worthy of researching. We divide regional inequality into two dimensions: production and consumption, a total of three indicators. The empirical research is carried out to the eastern, central and western regions respectively. It is found that industrial intelligence improves the inequality of residents’ consumer welfare among regions, while at the same time there is the possibility of worsening regional inequality of innovation. We also clarify the heterogeneity of the mechanisms that artificial intelligence promotes innovation in different regions.
    Keywords: Artificial Intelligence; Regional Inequality; Innovation; Purchasing Power
    JEL: L25 O32
    Date: 2021–10
  9. By: Geraci, Andrea; Nardotto, Mattia; Reggiani, Tommaso (Cardiff Business School); Sabatini, Fabio
    Abstract: We study the impact of broadband penetration on social capital in the UK. Our empirical strategy exploits a technological feature of the telecommunication infrastructure that generated substantial variation in the quality of Internet access across households. The speed of a domestic connection rapidly decays with the distance of a userÕs line from the networkÕs node serving the area. Merging information on the topology of the network with geocoded longitudinal data about individual social capital from 1997 to 2017, we show that access to fast Internet caused a significant decline in civic and political engagement. Overall, our results suggest that broadband penetration crowded out several dimensions of social capital.
    Keywords: ICT, broadband infrastructure, networks, Internet, social capital, civic capital.
    JEL: D91 L82 Z13
    Date: 2021–12
  10. By: Tri VuPhu; Keun Lee; Donghyun Park
    Abstract: In this paper, we examine how digitalization affects global value chain. By using empirical evidence at firm level, the paper analyzes the process of the value chain digitalization in the apparel industry. We find that the digitalization of value chains usually originates in downstream stages where platforms emerge and disrupt traditional retailers. Traditional distributional channels such as department stores and mass merchandise stores are replaced by online marketplaces and E-commerce platforms. This type of value chain digitalization, or E-commerce, may be called platform digitalization. In this mode, manufacturers still own design and make production decisions, but the products are digitally distributed through E-commerce platforms, thus bypassing traditional methods of distribution such as department stores and mass merchandise stores. In other words, the value chain is flattened, allowing customers to purchase apparel products at their homes with a few clicks. This transformation of GVC digitalization may have opposite implications for the SMEs and startup manufacturers. On the positive side, the platforms lower customer acquisition cost and results in a higher level of labor productivity. On the negative side, firms have to pay a significant amount of platform provider fees to platform owners. Further, there could be asymmetric impacts on SMEs/startups and old/incumbent firms since the latter face a trade-off between revenue/customer growth and profitability. Alternatively, a full range mode of digitalization is also possible and observed. This mode involves the rise of platform owners who are also brand managers and designers. Here platforms are trying to go beyond the primary role of a two-sided marketplace to penetrate deeper into higher value-added stages of designs and/or brands. The consequent emergence of new hybrid firms has sizable economic consequences.
    Keywords: Digitalization; Digital Platform; E-commerce; Platform Provider Fee; Value Chain; Upgrading; Apparel;
    JEL: F23 O33
    Date: 2022–01
  11. By: Louise Lindbjerg; Theodor Vladasel
    Abstract: Technical human capital improves firms' invention outcomes, but generating innovation revenue may require distinct skills in bringing new ideas to market. We argue that former founders are endowed with execution skills, a generalist ability to create and exploit market gaps by acquiring and mobilizing resources, so entrepreneurial human capital enhances innovation in established organizations. Combining register and Community Innovation Survey data from Denmark, we show that entrepreneur hires are associated with higher sales from new products and services. This result is driven by founder hires in middle management, a hierarchical position where broader decision rights and resource access increase execution skills' effectiveness. Founder hires are more tightly linked to innovation new to the firm or market, rather than world, consistent with our prediction that execution skills help bring incremental improvements to market, but do not necessarily generate radical innovation. Together, our findings suggest that entrepreneurial human capital may help firms appropriate a larger share of the value their knowledge generates.
    Keywords: innovation, learning by hiring, entrepreneurship, execution skills, human capital, middle management
    JEL: J24 L23 M12 M21 M51
    Date: 2021–12
  12. By: Andres Gomez-Lievano (Center for International Development at Harvard University); Frank Neffke (Center for International Development at Harvard University); Yang Li; James McNerney (Center for International Development at Harvard University)
    Abstract: In the short-term, economies shift preferentially into new activities that are related to ones they currently do. Such a tendency should have implications for the nature of an economy’s long-term development as well. We explore these implications using a dynamical network model of an economy’s movement into new activities. First, we theoretically derive a pair of coordinates that summarize long-term structural change. One coordinate captures overall ability across activities, the other captures an economy’s composition. Second, we show empirically how these two measures intuitively summarize a variety of facts of long-term economic development. Third, we observe that our measures resemble complexity metrics, though our route to these metrics differs significantly from previous ones. In total, our framework represents a dynamical approach that bridges short-and long-term descriptions of structural change, and suggests how different branches of economic complexity analysis could potentially fit together in one framework.
    Keywords: economic complexity, structural change
    Date: 2021–10
  13. By: Hao, Miao; Lyv, Kangjuan; Li, Shiyuan; Hu, Wuyang
    Abstract: Environmental regulation can be an effective tool for the government to balance the relationship between the ecology and economic development. In this paper, the corporate life cycle theory is incorporated into environmental regulation policy evaluation, and the impact of environmental regulation on the output of innovation by China’s enterprises in different development stages is analyzed. The results show that environmental regulation significantly promotes innovation and particularly green innovation of all enterprises in China. The effect is especially strong for enterprises in the start-up and growing stage, and the impetus for innovation among private enterprises is significantly greater than that of state-owned enterprises. The mechanism behind these results is also analyzed. This paper extends the existing theoretical framework and provides empirical reference for future environmental policy research. Also, we provide guidance for the government to formulate environmental policies according to the development tasks of different stages and the nature of different enterprises, so as to achieve the social and economic goals effectively.
    Keywords: Corporate Life Cycle; Two Control Zones; Innovation; Environmental Regulation; Difference-in-Difference
    JEL: L51 O44 Q55
    Date: 2021–10
  14. By: Pérez Rodríguez, Sandra (ROA / Labour market and training, RS: GSBE other - not theme-related research); van der Velden, Rolf (RS: GSBE Theme Learning and Work, ROA / Education and transition to work); Huijts, Tim (ROA / Health, skills and inequality, RS: GSBE Theme Learning and Work); Jacobs, Babs (ROA / Education and transition to work, RS: GSBE other - not theme-related research)
    Abstract: Skill mismatches have strong negative effects on productivity, job satisfaction, and other outcomes. To reduce skill mismatches, governments need to rely on accurate data on the prevalence of these mismatches. The Programme of the International Assessment of Adult Competences (PIAAC) is currently the most important data source providing excellent and unparalleled information for many countries on two key information-processing skills (i.e., literacy and numeracy skills). However, although these data contain rich information about possessed skills, countries lack directly comparable information on the required skills in those domains. Hence, it has been difficult to use the PIAAC data to identify skill mismatches, other than through proxies of required skills (e.g., the average skill level in occupations) or workers’ self-assessments of skill mismatch. In this paper, we use the Job Analysis Method (JAM) to determine the required skill levels of literacy and numeracy for all 4-digit ISCO08 unit groups of occupations in the same metric and scale as was used in PIAAC. JAM involves the use of occupational experts to rate the skill requirements in the different occupations. JAM has never been used before to identify required skill levels for literacy and numeracy as measured in PIAAC, and the paper thus presents the first results on the prevalence of skill shortages and skill surpluses in these key information-processing skills across different OECD countries and across different occupations and sectors that is based on a more direct estimate of the required skills. We provide estimates for the proportions of well-matched, overskilled and underskilled workers per country, and compare these with estimates based on alternative methods for estimating skill mismatch. We also compare JAM with these other methods in explaining wage differentials, as well as job satisfaction. We conclude that there are large differences in the estimates of the prevalence of skill mismatches depending on the method used. We show several advantages using JAM and discuss some of the limitations as well.
    JEL: J24
    Date: 2021–12–31
  15. By: Breuer, Matthias; Leuz, Christian; Vanhaverbeke, Steven
    Abstract: We investigate the impact of reporting regulation on corporate innovation. Exploiting thresholds in Europe's regulation and a major enforcement reform in Germany, we find that forcing firms to publicly disclose their financial statements discourages innovative activities. Our evidence suggests that reporting regulation has significant real effects by imposing proprietary costs on innovative firms, which in turn diminish their incentives to innovate. At the industry level, positive information spillovers (e.g., to competitors, suppliers, and customers) appear insufficient to compensate the negative direct effect on the prevalence of innovative activity. The spillovers instead appear to concentrate innovation among a few large firms in a given industry. Thus, financial reporting regulation has important aggregate and distributional effects on corporate innovation.
    Keywords: Innovation,Regulation,Disclosure,Financial Reporting,Patents,Growth
    JEL: K22 L51 M41 M42 M48 O43 O47
    Date: 2021

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