nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2022‒08‒08
fifteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Research joint ventures: The role of financial constraints By Philipp Brunner; Igor Letina; Armin Schmutzler
  2. Flow of Ideas: Economic Societies and the Rise of Useful Knowledge By Francesco Cinnirella; Erik Hornung; Julius Koschnick
  3. Anatomy of Green Specialisation: Evidence from EU Production Data, 1995-2015 By Francesco Vona; Francesco Bontadini
  4. Regional heterogeneity in occupational change: Using Census data to investigate employment polarisation and upgrading at NUTS-3 level By VERA-TOSCANO Esperanza; FANA Marta; FERNANDEZ MACIAS Enrique
  5. Green credit policy and total factor productivity: Evidence from Chinese listed companies By Shu Guo; ZhongXiang Zhang
  6. The economic returns of circular economy practices By Davide Antonioli; Claudia Ghisetti; Massimiliano Mazzanti; Francesco Nicolli
  7. Innovation, growth, and productivity appropriation. How the elites learned to stop worrying and love public debt By Jacopo Di Domenico; Alberto Russo
  8. On the road to regional ‘Competitive Environmental Sustainability’: the role of the European structural funds By MARQUES SANTOS Anabela; BARBERO JIMENEZ Javier; SALOTTI Simone; DIUKANOVA Olga; PONTIKAKIS Dimitrios
  9. The Impact of ICT and Intangible Capital Accumulation on Labour Demand Growth and Functional Income Shares By Robert Stehrer
  10. ICT, Technological Diffusion and Economic Growth in Chinese Cities By Qing Li; Yanrui Wu
  11. Digitalisation, Institutions and Governance, and Diffusion: Mechanisms and Evidence By Baccianti, Claudio; Labhard, Vincent; Lehtimäki, Jonne
  12. Endogenous Technological Change in Power Markets By Mathias Mier; Jacqueline Adelowo; Valeriya Azarova
  13. Consequences of job loss for routine workers By Yakymovych, Yaroslav
  14. Industrial Robots, Workers' Safety, and Health By Rania Gihleb; Osea Giuntella; Luca Stella; Tianyi Wang
  15. Investing in Innovation: A Policy Framework for Attaining Sustainable Prosperity in the United States By William Lazonick

  1. By: Philipp Brunner; Igor Letina; Armin Schmutzler
    Abstract: This paper provides a novel theory of research joint ventures for financially constrained firms. When firms choose R&D portfolios, an RJV can help to coordinate research efforts, reducing investments in duplicate projects. This can free up resources, increase the variety of pursued projects and thereby increase the probability of discovering the innovation. RJVs improve innovation outcomes when market competition is weak and external financing conditions are bad. An RJV may increase the innovation probability and nevertheless lower total R&D costs. RJVs that increase innovation tend to be profitable, but innovation-reducing RJVs also exist. Finally, we compare RJVs to innovation-enhancing mergers.
    Keywords: Innovation, research joint ventures, financial constraints, mergers, intensity of competition, licensing
    JEL: L13 L24 O31
    Date: 2022–07
  2. By: Francesco Cinnirella (University of Bergamo); Erik Hornung (University of Cologne); Julius Koschnick (London School of Economics)
    Abstract: Economic societies emerged during the late eighteenth-century. We argue that these institutions reduced the costs of accessing useful knowledge by adopting, producing, and diffusing new ideas. Combining location information for the universe of 3,300 members across active economic soci-eties in Germany with those of patent holders and World’s Fair exhibitors, we show that regions with more members were more innovative in the late nineteenth-century. This long-lasting effect of societies arguably arose through agglomeration economies and localized knowledge spillovers. To support this claim, we provide evidence suggesting an immediate increase in manufacturing, an earlier establishment of vocational schools, and a higher density of highly skilled mechanical workers by mid-nineteenth century in regions with more members. We also show that regions with members from the same society had higher similarity in patenting, suggesting that social networks facilitated spatial knowledge diffusion and, to some extent, shaped the geography of innovation.
    Keywords: Economic Societies, Useful Knowledge, Knowledge Diffusion, Innovation, Social Networks
    JEL: N33 O33 O31 O43
    Date: 2022–07
  3. By: Francesco Vona (University of Milan, Department of Environmental Science and Policy, Fondazione Eni Enrico Mattei (FEEM) and OFCE Sciences-Po); Francesco Bontadini (OFCE Sciences-Po, LUISS Guido Carli University and SPRU – University of Sussex)
    Abstract: We study green specialisation across EU countries and detailed 4-digit industrial sectors over the period of 1995-2015 by harmonizing product-level data (PRODCOM). We propose a new list of green goods that refines lists proposed by international organizations by excluding goods with double usage. Our analysis reveals important structural characteristics of green specialisation in the manufacturing sector. First, green production is highly concentrated, with 13 out of 119 4-digit industries, which are high-tech and account for nearly 95% of the total. Second, green and polluting productions do not occur in the same sectors, and countries specialise in either green or brown sectors. Third, our econometric analysis identifies three key drivers of green specialisation: (i) first-mover advantage and high persistence of green specialisation, (ii) complementarity with non-green capabilities and (iii) the degree of diversification of green capabilities. Importantly, once we control for these drivers, environmental policies are not anymore positively associated with green specialisation.
    Keywords: Green goods, green specialisation, environmental policies, complementarity, path dependency
    JEL: Q55 L60 O44
    Date: 2022–06
  4. By: VERA-TOSCANO Esperanza; FANA Marta (European Commission - JRC); FERNANDEZ MACIAS Enrique (European Commission - JRC)
    Abstract: Using Census data, this paper proposes an empirical approach to look at differences and changes in the composition of employment across NUTS-3 level regions of six European Union countries over the period 1981 – 2011. We focus on jobs (defined as specific occupations within specific sectors) as our unit of analysis. We rank all jobs based on their average educational level and divide these distribu-tions into terciles. We accommodate the approach to compare regions to their national average and see how they evolve compared to the national trend. Our aim is to determine if regional employment structures converge over time and whether they are polarising, upgrading or downgrading. Several hypotheses regarding possible underlying factors of structural changes are further discussed. Results show a high degree of heterogeneity in the different regions. This presents considerable challenges for policymakers, as they need to gear their efforts at regional, more localised level.
    Keywords: Job polarisation, economic restructuring, technological change, Census data, regional heterogeneity
    Date: 2022–07
  5. By: Shu Guo (Ma Yinchu School of Economics, Tianjin University and China Academy of Energy, Environmental and Industrial Economics); ZhongXiang Zhang (Ma Yinchu School of Economics, Tianjin University and China Academy of Energy, Environmental and Industrial Economics)
    Abstract: The green credit policy plays a vital role in promoting enterprise upgrading. Using a thirteen year panel data of listed companies in China (2007 2019), this study uses the difference in differences (DID) method to examine the effects of the Green Credit Guidelines in 2012 (GCG2012) on the firm level total factor productivity (TFP). Our results show that the GCG2012 significantly increases the TFP of companies in green credit restricted industries. This finding remains robust through employing the PSM-DID model, alternating the treatment group, changing the sample period, and controlling the effects of other environmental policies and financial crises. This effect is more pronounced for private enterprises, companies with worse debt paying ability, companies in highly competitive industries and companies in regions with higher financial liberalization. The impact mechanism test indicates that increasing the green innovation and reducing the agency costs (including green agency costs and traditional agency costs) are two possible channels to boost firm level TFP. Further analysis shows that the GCG2012 is effective not only for heavily polluting industries but also for light polluting industries, and that the GCG2012 can improve the economic performance of firms in green credit restricted industries. Overall, this study reveals the micro mechanisms behind the long term impact of the GCG2012 policy on firm level TFP, providing empirical evidence and policy suggestions for improving green credit policies and promoting green development.
    Keywords: Green credit policy, green finance, total factor productivity, PSM-DID model, China
    JEL: Q48 Q53 Q55 Q58 O13 P28 R11 H23
    Date: 2022–05
  6. By: Davide Antonioli (Department of Economics and Management, University of Ferrara and SEEDS – Centre for Sustainability, Environmental Economics and Dynamics Studies); Claudia Ghisetti (Università degli studi di Milano Bicocca); Massimiliano Mazzanti (Department of Economics and Management, University of Ferrara and SEEDS – Centre for Sustainability, Environmental Economics and Dynamics Studies); Francesco Nicolli (Department of Economics and Management, University of Ferrara and SEEDS – Centre for Sustainability, Environmental Economics and Dynamics Studies)
    Abstract: Assessing the economic consequences of sustainable production choices aimed at reducing environmental negative externalities is crucial for policy making, in light of the increasing interest and awareness experienced in the recent EU policy packages (Circular Economy package; European Green Deal and Recovery Fund to support sustainable transition). This assessment is one of the goal of the current work, which tries to provide new empirical evidence on the economic returns of such choices, drawing on previous literature on the underlying determinants of greener production choices, which are stated to differ from standard technological innovations as they are subject to a knowledge and an environmental externality. Using an original dataset on about 3000 Italian manufacturing firms we provide evidence on the relations among innovations related to the Circular Economy concept and economic outcome in the short run. The evidence shows that in the short run it is difficult to obtain economic gains, especially for the SMEs.
    Keywords: Circular Economy, Sustainable Production, Environmental Innovation, Economic Effect
    JEL: O30 O44 O55
    Date: 2022–02
  7. By: Jacopo Di Domenico (Department of Economics and Social Sciences, Università Politecnica delle Marche, Ancona); Alberto Russo (Department of Management, Università Politecnica delle Marche, Ancona, Italy and Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: In this study, we propose the exploration of the characteristics of the Sraffian- Supermultiplier model where technological change and autonomous demand, coming from the public sector, determine the macroeconomic dynamics. The growth rate of the economy is determined by the productivity growth path that frees up labor to be employed in the production of alternative goods, and the public sector that, if not willing to accept high unemployment, has to increase its expenditure and generate the necessary demand for achieving spread (macroeconomic) growth. Because of the dependency of technological change on the sales level (due to the possibilities this offers in terms of labor division) at the macro and meso dimension, in contrast to the majority of the Supermultiplier models, the long-run growth rate of our artificial economy is also affected by the income distribution (both functional and personal) which affects the level of the total demand and shapes its composition across sectors. For the purpose of our research, we develop a multi-sectoral macroeconomic Agent based - Stock Flow consistent model (AB-SFC). The model is grounded on a theoretical framework representing a monetary economy of production (e.g. Graziani, Lavoie) where the principle of effective demand determines the level of output, while innovation is characterized by a typical Schumpeterian process of creation and destruction. The functional income distribution is determined as in classical theory and results from the struggle between capitalists and workers. The markup fixed by companies over normal unit-cost of production determines the normal rate of profit. Money is endogenous and is injected into the system when banks grant loans to companies to finance investments or wages anticipation and Government expenditure is financed by issuing public bonds. We study the impact the yearly performances have on the long-run path of the economy. After showing that the process innovation represents a necessary but not sufficient element for economic growth (and also a possible source of economic instability) which requires a public state with a hands-on approach (that increases its debt every time an increase in productivity occurs and stabilizes the economy) to achieve macroeconomic growth, we study how different productivity gain appropriations (and therefore different distribution configuration) affect the future trend of productivity (and therefore the long-run growth rate of the economy) through changes in the level of aggregate volumes and their allocation between sectors.
    Keywords: growth, productivity, distribution, instability, public debt, agent-based model, stock-flow consistency
    JEL: C63 H63 O33 O41
    Date: 2022
  8. By: MARQUES SANTOS Anabela (European Commission - JRC); BARBERO JIMENEZ Javier (European Commission - JRC); SALOTTI Simone (European Commission - JRC); DIUKANOVA Olga (European Commission - JRC); PONTIKAKIS Dimitrios (European Commission - JRC)
    Abstract: We construct a novel indicator of regional competitive sustainability based on the changes over time of employment sectoral shares across all the regions of the European Union. The indicator accounts for shifts in employment towards greener and more productive sectors over the 2008-2018 period. The mapping of the indicators shows considerable regional heterogeneity in terms of both competitiveness and environmental sustainability, as well as interesting dynamics over time. We present an econometric analysis of the determinants of these sectoral shifts. It appears that the European Structural Funds are positively associated with the transition towards a more competitive and sustainable economy at the regional level. This is particularly true for the competitive dimension of the transition, with the Funds being positively associated with regional employment restructuring towards more productive sectors within each country.
    Keywords: Green transition, public support, sectoral employment, European regions
    Date: 2022–07
  9. By: Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper investigates whether the diffusion of tangible IT and CT capital and intangible capital asset types has an impact on labour demand growth and the share of labour income in total income at the industry and country level. The econometric analysis is derived from a Cobb-Douglas production function taking empirical stylized facts into account. The effects of technical progress embodied in the various forms of capital impact along inter-industry and intercountry production linkages, which are considered by using global value chain indicators. The analysis is broken down to examine the influence on different types of labour, including the dimensions of gender, age, and educational attainment. Accumulation of ICT assets have generally insignificant and in some cases small positive effects on labour demand and income shares, though patterns differ across types of labour. Intangible assets show a positive relation with respect to labour demand growth.
    Keywords: capital accumulation, ICT capital, intangibles, labour demand, income distribution
    JEL: J23 J31 O33 O52
    Date: 2022–07
  10. By: Qing Li (Department of Economics and Finance, SILC Business School, Shanghai University); Yanrui Wu (Business School, The University of Western Australia)
    Abstract: This study uses a rich city-level dataset to analyse the relationship between information and communication technology (ICT) and economic growth in Chinese cities during 2001-2016. It is shown that ICT not only improves the aggregate efficiency of a city but also helps the city absorb technological diffusion from the frontier city. In addition, distance plays little role in technological diffusion process associated with ICT. Cities geographically farther away from or closer to the frontier city can equally benefit from technological diffusion as long as they have the same level of ICT development.
    Keywords: ICT, technological diffusion, economic growth, Chinese cities
    JEL: O47 O33 R11
    Date: 2022
  11. By: Baccianti, Claudio; Labhard, Vincent; Lehtimäki, Jonne
    Abstract: Digitalisation can be described as a sequence of technology and supply shocks which affect the economy through employment and labour markets, productivity and output, and competition and market structure. This paper focuses on how digitalisation - the process of diffusion of digital technologies - is affected by institutions and governance. It discusses a number of theoretical mechanisms and empirical evidence for different sets of European and other countries. The results indicate that a higher quality of institutions is usually associated with both a greater speed of diffusion and a greater spread of digital technologies. The results also suggest that there are large, policy-relevant differences in the diffusion process depending on the level of development as well as the state of technological change of a country. JEL Classification: E02, O11, O31, O33, O57
    Keywords: adoption, economy, estimates, panel, technology
    Date: 2022–07
  12. By: Mathias Mier; Jacqueline Adelowo; Valeriya Azarova
    Abstract: Decarbonization requires the transformation of power markets towards renewable energies and investment costs are decisive for the deployed technologies. Exogenous cost assumptions cannot fully reflect the underlying dynamics of technological change. We implement divergent learning-by-doing specifications in a multi-region power market model by means of mixed-integer programming to approximate non-linear investment costs. We consider European learning, regional learning, and three different ways to depreciate experience stocks within the European learning metric: perfect recall, continuous forgetting, and lifetime forgetting. Learning generally yields earlier investments. European learning fosters the deployment of solar PV and wind onshore, whereas regional learning leads to more wind offshore deployment in regions with high wind offshore quality. Perfect recall fosters solar PV and wind onshore expansion, whereas lifetime forgetting fosters wind offshore usage. Results for continuous forgetting are in between those of perfect recall and lifetime forgetting. Generally, learning leads to the earlier deployment of learning technologies but regional patterns are different across learning specifications and also deviate significantly from this general pattern of preponing investments.
    Keywords: Endogenous technological change, learning-by-doing, forgetting, renewable energies, power market model, decarbonization
    JEL: C61 H21 H23 H43 L94
    Date: 2022
  13. By: Yakymovych, Yaroslav (Department of Economics, Uppsala University)
    Abstract: Routine-biased technological change has led to the worsening of labour market prospects for workers in exposed occupations as their work has increasingly been done by machines. Routine workers who have lost their jobs in mass displacement events are likely to have been a particularly affected group, due to potential difficulties in finding new employment that matches their skills and experience. In this study, the annual earnings, employment, monthly wages and days of unemployment of displaced routine workers are compared to those of displaced non-routine workers using Swedish matched employer-employee data. The results show substantial routine-occupation penalties among displaced workers, which persist in the medium to long term. Compared to displaced non-routine workers, displaced routine workers lose an additional year’s worth of pre-displacement earnings and spend 180 more days in unemployment. A possible channel for this effect is the loss of occupation- and industry-specific human capital, as routine workers are unable to find jobs similar to those they had before becoming displaced. I do not find evidence that switching to a non-routine occupation reduces routine workers’ losses, but rather there are indications that switchers do worse in the short-to-medium run. The findings suggest that the effects of labour-replacing technological change on the most exposed individuals can be severe and difficult to ameliorate.
    Keywords: Routine-biased technological change; Mass layoffs
    JEL: J63 O33
    Date: 2022–07–07
  14. By: Rania Gihleb; Osea Giuntella; Luca Stella; Tianyi Wang
    Abstract: This study explores the relationship between the adoption of industrial robots and workplace injuries. Using establishment-level data on injuries, we find that a one standard deviation increase in our commuting zone-level measure of robot exposure reduces work-related annual injury rates by approximately 1.2 cases per 100 workers. US commuting zones more exposed to robot penetration experience a significant increase in drug- or alcohol-related deaths and mental health problems. Employing longitudinal data from Germany, we exploit within-individual changes in robot exposure and document that a one standard deviation change in robot exposure led to a 4% decline in physical job intensity and a 5% decline in disability, but no evidence of significant effects on mental health and work and life satisfaction.
    JEL: I10 J0 J28
    Date: 2022–06
  15. By: William Lazonick (The Academic-Industry Research Network)
    Abstract: "Sustainable prosperity" denotes an economy that generates stable and equitable growth for a large and growing middle class. From the 1940s into the 1970s, the United States appeared to be on a trajectory of sustainable prosperity, especially for white-male members of the U.S. labor force. Since the 1980s, however, an increasing proportion of the U.S labor force has experienced unstable employment and inequitable income, while growing numbers of the business firms upon which they rely for employment have generated anemic productivity growth. Stable and equitable growth requires innovative enterprise. The essence of innovative enterprise is investment in productive capabilities that can generate higher-quality, lower-cost goods and services than those previously available. The innovative enterprise tends to be a business firm - a unit of strategic control that, by selling products, must make profits over time to survive. In a modern society, however, business firms are not alone in making investments in the productive capabilities required to generate innovative goods and services. Household units and government agencies also make investments in productive capabilities upon which business firms rely for their own investment activities. When they work in a harmonious fashion, these three types of organizations - household units, government agencies, and business firms—constitute "the investment triad." The Biden administration's Build Back Better agenda to restore sustainable prosperity in the United States focuses on investment in productive capabilities by two of the three types of organizations in the triad: government agencies, implementing the Infrastructure Investment and Jobs Act, and household units, implementing the yet-to-be-passed American Families Act. Absent, however, is a policy agenda to encourage and enable investment in innovation by business firms. This gaping lacuna is particularly problematic because many of the largest industrial corporations in the United States place a far higher priority on distributing the contents of the corporate treasury to shareholders in the form of cash dividends and stock buybacks for the sake of higher stock yields than on investing in the productive capabilities of their workforces for the sake of innovation. Based on analyzes of the "financialization" of major U.S. business corporations, I argue that, unless Build Back Better includes an effective policy agenda to encourage and enable corporate investment in innovation, the Biden administration's program for attaining stable and equitable growth will fail. Drawing on the experience of the U.S. economy over the past seven decades, I summarize how the United States moved toward stable and equitable growth from the late 1940s through the 1970s under a "retain-and-reinvest" resource-allocation regime at major U.S. business firms. Companies retained a substantial portion of their profits to reinvest in productive capabilities, including those of career employees. In contrast, since the early 1980s, under a "downsize-and-distribute" corporate resource-allocation regime, unstable employment, inequitable income, and sagging productivity have characterized the U.S. economy. In transition from retain-and-reinvest to downsize-and-distribute, many of the largest, most powerful corporations have adopted a "dominate-and-distribute" resource-allocation regime: Based on the innovative capabilities that they have previously developed, these companies dominate market segments of their industries but prioritize shareholders in corporate resource allocation. The practice of open-market share repurchases - aka stock buybacks - at major U.S. business corporations has been central to the dominate-and-distribute and downsize-and-distribute regimes. Since the mid-1980s, stock buybacks have become the prime mode for the legalized looting of the business corporation. I call this looting process "predatory value extraction" and contend that it is the fundamental cause of the increasing concentration of income among the richest household units and the erosion of middle-class employment opportunities for most other Americans. I conclude the paper by outlining a policy framework that could stop the looting of the business corporation and put in place social institutions that support sustainable prosperity. The agenda includes a ban on stock buybacks done as open-market repurchases, radical changes in incentives for senior corporate executives, representation of workers and taxpayers as directors on corporate boards, reform of the tax system to reward innovation and penalize financialization, and, guided by the investment-triad framework, government programs to support "collective and cumulative careers" of members of the U.S. labor force. Sustained investment in human capabilities by the investment triad, including business firms, would make it possible for an ever-increasing portion of the U.S. labor force to engage in the productive careers that underpin upward socioeconomic mobility, which would be manifested by a growing, robust, and hopeful American middle class.
    Keywords: Investment triad, productive capabilities, corporate governance, innovative enterprise, strategic control, organizational integration, financial commitment, retain-and-reinvest, dominate-and-distribute, downsize-and-distribute, stock buybacks, stock prices, executive pay, corporate taxation, career learning, Joe Biden, Build Back Better
    JEL: B59 D01 D02 D04 D2 D3 G3 H00 J5 L1 L2 L5 M1 O3 O43
    Date: 2022–03–30

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