nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2023‒03‒13
twelve papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. How the green and digital transitions are reshaping the automotive ecosystem By Antoine Dechezleprêtre; Luis Díaz; Milenko Fadic; Guy Lalanne
  2. The economic benefits of early green innovation: Evidence from the automotive sector By Alberto Agnelli; Hélia Costa; Damien Dussaux
  3. Wages and Productivity in Argentinian Manufacturing. A Structuralist and Distributional firm-level Analysis By María Celeste Gómez; Maria Enrica Virgillito
  4. Driving low-carbon innovations for climate neutrality By Chiara Criscuolo; Antoine Dechezleprêtre; Mario Cervantes
  5. Inter-industry and Intra-industry Switching as Sources of Productivity Growth: Structural Change of Finland’s ICT Industries By Kuosmanen, Natalia; Kuosmanen, Timo
  6. Automation and Productivity: Evidence from Thai Manufacturing Firms By Kanit Sangsubhan; Kumpon Pornpattanapaisankul; Pisacha Kambuya
  7. Technological chance and growth regimes: Assessing the case for universal basic income in an era declining labour shares By Chrisp, Joe; Garcia-Lazaro, Aida; Pearce, Nick
  8. Global value chain dependencies under the magnifying glass By Cyrille Schwellnus; Antton Haramboure; Lea Samek; Ricardo Chiapin Pechansky; Charles Cadestin
  9. Economics of ChatGPT: A Labor Market View on the Occupational Impact of Artificial Intelligence By Zarifhonarvar, Ali
  10. Occupational polarisation and endogenous task-biased technical change By Wenchao Jin
  11. Assessing the impact of regulations and standards on innovation in the field of AI By Alessio Tartaro; Adam Leon Smith; Patricia Shaw
  12. Advanced digital technologies and investment in employee training: Complements or substitutes? By Brunello, Giorgio; Rückert, Désirée; Weiss, Christoph; Wruuck, Patricia

  1. By: Antoine Dechezleprêtre; Luis Díaz; Milenko Fadic; Guy Lalanne
    Abstract: The automotive sector is important across OECD countries in terms of value-added and R&D, but is also heavily affected by the green and the digital transformations. This paper offers a novel and holistic view of the automotive sector and its surrounding ecosystem based on a combination of Inter-Country Input-Output (ICIO) tables, patent data, mergers and acquisitions (M&A) transactions, cross-country micro-distributed data and firm-level balance sheet data. It identifies the boundaries of this industrial ecosystem including connected sectors (e.g. upstream and downstream) as well as knowledge and technology providers (e.g. universities or the digital industry). The paper documents emerging trends at the geographical and technological levels and provides a comprehensive assessment of the ecosystem’s changing microstructure, with a growing role of young and digital-intensive companies. Finally, it provides recommendations for effective public policies to support the automotive ecosystem, with a focus on innovation, competition and the growth of young firms.
    Keywords: automotive, autonomous vehicles, decarbonisation, industrial ecosystems, industrial policy
    JEL: L62 O25 L50 O38 Q58
    Date: 2023–03–01
  2. By: Alberto Agnelli; Hélia Costa; Damien Dussaux
    Abstract: The economic consequences for firms investing in green innovation, and therefore their incentives to innovate, are not well understood. This paper empirically assesses the economic returns on innovation in cleaner vehicles. The analysis uses data on passenger car market shares and patents for car manufacturers operating in eight countries for the period 2005-2021. The results show that, when vehicle fuel prices increase, firms having previously successfully filed patents related to both electric and hybrid vehicles and fuel efficiency experience an increase in their market share. This increase takes place between 7 and 8 years after the patent stock is accumulated for patents related to electric and hybrid vehicles and between 8 and 15 years for patents related to fuel efficiency. The analysis also finds that in contexts where fuel price salience is high, price increases generate larger and earlier competitiveness returns for firms having previously invested in cleaner technologies.
    Keywords: firm performance, fuel prices, fuel taxation, green technology, price salience, technological change
    JEL: O30 Q55 Q48
    Date: 2023–02–22
  3. By: María Celeste Gómez (Universidad Nacional de Córdoba/CONICET); Maria Enrica Virgillito (Scuola Universitaria Superiore Sant’Anna)
    Abstract: Wages and productivity represent two of the most relevant variables to consider in economic development. Given the low productivity levels that emerging countries reveal, the accumulation of productive capabilities and a narrower dispersion across sectors would enable emerging countries to overcome the middle-income trap. Y et, this positive trend in productivity should translate into higher wages. Thus, we pose the following questions applied to a middle-income trapped country: is there a link between labour productivity and wages in the Argentine manufacturing sector? Does it differ across techno-productive classes or wage levels? Which factors affect this nexus, considering premature deindustrialisation? Using a firm-level dataset from 2010 to 2016, we perform quantile regression estimates to evaluate the link between productivity and wages across the conditional wage distribution among manufacturing firms. Based on a structural analysis, we identify the differences in these elasticities at 2-ISIC code levels and across Pavitt taxonomies. Our results confirm a positive , but extremely low, pass-through between productivity and wages in the Argentinian manufacturing firms, different across sectors according to their techno-productive capabilities, robust under different empirical strategies
    Keywords: Gains from productivity, Development, Asymmetries
    JEL: J31 D24 L6 O14 C21
    Date: 2023–02
  4. By: Chiara Criscuolo; Antoine Dechezleprêtre; Mario Cervantes
    Abstract: The transition to climate neutrality requires cost reductions in existing clean technologies to enable rapid deployment on a large scale, as well as the development of emerging technologies such as green hydrogen. This policy paper argues that science, technology, innovation, and industrial (STI&I) policies focusing on developing and deploying low-carbon technologies are crucial to achieving carbon neutrality. It notes however that the current level of innovation is insufficient to meet the net-zero challenge due to a policy emphasis on deployment rather than research and development (R&D) support. The paper explores the rationale for more ambitious STI&I policies targeted at R&D for climate neutrality and provides policy recommendations for an effective innovation policy for net-zero, including its interaction with the broader climate policy package.
    Keywords: climate change mitigation, innovation policy, low-carbon innovation, technological change
    JEL: O38 Q54 Q55 Q58
    Date: 2023–03–01
  5. By: Kuosmanen, Natalia; Kuosmanen, Timo
    Abstract: Abstract Structural change is an important driver of productivity growth at the aggregate level. While previous productivity decompositions account for the contributions of market entry and exit, they overlook continuing firms that switch from one industry to another. We develop an improved productivity decomposition that accounts for both intra-industry and inter-industry switching, is applicable to both static and inter-temporal settings, and ensures consistent aggregation of firm level productivity to the industry level. The proposed decomposition is applied to Finland’s information and communication technology (ICT) industry in the first two decades of the 21st century. This industry experienced major structural changes due to the rapid downfall of Nokia, the world’s largest mobile phone manufacturer at the beginning of our study period. Our results reveal that the sharp decline of labor productivity was associated with the structural changes, whereas the surviving firms that continued in the same industry managed to improve their productivity. Our results indicate that industry switching can dampen or enhance the productivity impacts of structural change, especially during the times of crisis and recession.
    Keywords: Entry and exit, Labor productivity, Product switching, Reallocation of resources
    JEL: D24 L16 O47
    Date: 2023–02–27
  6. By: Kanit Sangsubhan; Kumpon Pornpattanapaisankul; Pisacha Kambuya
    Abstract: Rapid advances in the automation technology have led to a rise of public interest among researchers and policy makers. In manufacturing, most papers proved that industrial robots and automation is a key enabler to improve firm’s competitiveness and the overall growth of country. However, the often referred to picture of this new technology as “job killers†caused by the decoupling of wages and output per worker. Using Thai manufacturing firm-level data, this paper provides empirical evidence that there is a positive relationship between firms adopting automated process and their TFP. However, being in EEC area shows mixed results. We also find that automation investment has positive significant effect on total employment. Furthermore, there is some evidence that automation is driving an increase in demand for skilled workers and has reduced unskilled activities.
    Keywords: Automation; Robots; Total factor productivity; Labor productivity; Employment; Skills; Firm investment
    JEL: D24 E24 O14 O33
    Date: 2023–02
  7. By: Chrisp, Joe; Garcia-Lazaro, Aida; Pearce, Nick
    Abstract: [Synopsis and motivation] In recent decades, most OECD countries have seen a significant decline in the labour share, as well as an increase in inequality. The decline in the labour share and the rise in inequality poses several problems for such countries, whether related to distributive justice, economic and social outcomes, such as deficient aggregate income and demand, or democratic politics. In this report, we focus on the role of technological change as a central driver of the decline in the labour share and explore its contingency: both across contexts and across definitions/operationalisations of technology. With respect to the latter, we distinguish between perspectives that place physical capital and investment in automation and ICT at the centre of technological change on the one hand, and the growth of the knowledge economy and intangible capital on the other. Meanwhile, following work by Baccaro and Pontusson (2016), and more recently Hassel and Palier (2021), we utilise the concept of 'growth regimes' to analyse how the effects of technology are mediated and moderated by national political-economic institutions. This approach allows us to test more nuanced arguments about the role of technological change in the decline in the labour share and to discuss the likely effects, and political feasibility, of policy solutions such as universal basic income (UBI) that are often advanced as an answer to increased automation and lower returns to labour. The following issues provide the basis for our research questions: 1. To what extent is technological change responsible for the decline in the labour share? 2. What is the role of growth regimes in moderating the effect of technology on the labour share? 3. Are results consistent across different conceptions and definitions of technological change? 4. What policy solutions are available to tackle these trends and issues? 5. Does technological change strengthen the case for and the feasibility of a universal basic income? This work builds on previous policy briefs and reports by the Institute for Policy Research (IPR) on UBI and technological change, namely the September 2019 report by Dr Luke Martinelli entitled 'Basic income, automation and labour market change' (Martinelli, 2019a). That report summarised the evidence regarding the effects of technology on labour markets and the case for UBI in such a light. Empirical analysis, however, focused on political economy questions concerning the political constituency for a UBI and policy trade-offs in design across EU countries using microsimulation analysis. Here, our empirical strategy is instead focused on questions about the effect of technology on the labour share, enabling us to re-pose the question of how a UBI could serve as a tool for combating growing inequality, income and demand deficiency, and labour market dysfunction in global economies. Future empirical research at the IPR will focus more comprehensively on the fifth and final research question above, namely estimating the macroeconomic effects of a UBI, including one funded using sovereign money. Next, we introduce three central ideas in the report - the decline in the labour share, technological change and growth regimes - before briefly outlining the consequences for policy debates.
    Date: 2023
  8. By: Cyrille Schwellnus; Antton Haramboure; Lea Samek; Ricardo Chiapin Pechansky; Charles Cadestin
    Abstract: Policy makers are increasingly grappling with the stability implications of global value chains (GVCs), as widespread supply shortages following the COVID-19 pandemic and the Russian Federation’s large-scale aggression against Ukraine have disrupted the economic recovery and contributed to high inflation. This paper provides a tool to assess vulnerabilities in GVCs by drawing a detailed map of dependencies based on new indicators constructed from the OECD Inter-Country Input-Output tables. The key findings are as follows. First, GVC dependencies increase with both the size of foreign exposures and the length of foreign value chains. Second, in some industries, such as the automotive and ICT industries, vulnerabilities from high GVC dependence are amplified by high geographic concentration of suppliers or buyers. Third, the People’s Republic of China is the most critical choke point in GVCs across a broad range of industries, both as a dominant supplier and as a dominant buyer.
    Keywords: global value chains, international trade, resilience
    JEL: F14 F68 L52
    Date: 2023–03–01
  9. By: Zarifhonarvar, Ali
    Abstract: This study examines how ChatGPT affects the labor market. I first thoroughly analyzed the prior research that has been done on the subject in order to start understanding how ChatGPT and other AI-related services are influencing the labor market. Using the supply and demand model, I then assess ChatGPT's impact. This paper examines this innovation's short- and long-term effects on the labor market, concentrating on its challenges and opportunities. Furthermore, I employ a text-mining approach to extract various tasks from the International Standard Occupation Classification to present a comprehensive list of occupations most sensitive to ChatGPT.
    Keywords: Large Language Models, Artificial Intelligence, Automation, Labor Saving Technology, ChatGPT, Labor Market, Generative AI, Occupational Classification
    JEL: O33 E24 J21 J24
    Date: 2023
  10. By: Wenchao Jin (Department of Economics, University of Sussex, BN1 9SL Falmer, United Kingdom)
    Abstract: Since the 90s many developed countries have experienced job polarisation, whereby employment shifts away from middle-paying jobs and towards both higher-paid and lower-paid ones. The most popular explanation is that technological changes have been biased against routine tasks. This paper offers a complementary explanation that emphasises the increase in skill supply and the resulting adoption of technology. I exploit the large policy-driven expansion of higher education in the UK and argue that this supply-side shift has caused the adoption of routine-biased technology and thereby employment polarisation. This framework is supported by three facts observed in the UK. First, employment has shifted from the middle to the top, with not much change at the bottom of the occupation distribution. Second, there were relatively little movements in occupational wages and the pattern is not U-shaped. Third, over a period of rapidly increasing supply of graduates, occupational outcomes among graduates have been broadly stable. I build an equilibrium multi-sector model of occupational labor and fit it to UK data over 1997-2015. I find that in most industries, technical change over the period was biased against routine tasks and favoured managerial and professional tasks. Allowing endogenous technological change, the shift in skills supply alone can account for between a third and two thirds of the actual decline in routine manual occupations.
    Keywords: job polarisation; Routine-Biased Technical Change
    JEL: J20 J24
    Date: 2022–12
  11. By: Alessio Tartaro; Adam Leon Smith; Patricia Shaw
    Abstract: Regulations and standards in the field of artificial intelligence (AI) are necessary to minimise risks and maximise benefits, yet some argue that they stifle innovation. This paper critically examines the idea that regulation stifles innovation in the field of AI. Current trends in AI regulation, particularly the proposed European AI Act and the standards supporting its implementation, are discussed. Arguments in support of the idea that regulation stifles innovation are analysed and criticised, and an alternative point of view is offered, showing how regulation and standards can foster innovation in the field of AI.
    Date: 2023–02
  12. By: Brunello, Giorgio; Rückert, Désirée; Weiss, Christoph; Wruuck, Patricia
    Abstract: Using firm-level data covering the 27 EU countries, the UK and the US, we show that employers tend to reduce investment in training per employee after adopting advanced digital technologies (ADT). We estimate with a control function approach firm-level production functions augmented with two factors, the training stock per employee and digital technology use. We show that ADT use and employee training are substitutes in production, implying that an increase in the former negatively affects the marginal productivity of the latter, and that a decline in the cost of introducing ADT reduces employers' investment in training per employee. These findings point to challenges in realizing high levels of firmsponsored training for employees in increasingly digital economies.
    Date: 2023

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