nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2023‒10‒16
twelve papers chosen by
Fulvio Castellacci, Universitetet i Oslo

  1. The global green shift: Where it comes from, how it works, and where it’s heading By Jan Fagerberg
  2. Centralization and Organization Reproduction: Ethnic Innovation in R&D Centers and Satellite Locations By William R. Kerr
  3. Technological Rivalry and Optimal Dynamic Policy in an Open Economy By Yan Bai; Keyu Jin; Dan Lu
  4. Are Software Automation and Teleworkers Substitutes? Preliminary Evidence from Japan By Richard Baldwin; Toshihiro Okubo
  5. Individualism, Creativity, and Innovation By Katharina Hartinger
  6. Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology By Filippo Biondi; Sergio Inferrera; Matthias Mertens; Javier Miranda
  7. Committing to Grow: Privatizations and Firm Dynamics in East Germany By Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
  8. Bottom-Up Policies Trump Top-Down Missions By Henrekson, Magnus; Stenkula, Mikael
  9. Climbing up global value chains: leveraging FDI for economic development By Crescenzi, Riccardo; Harman, Oliver
  10. A Tale of Two Countries: Two Stories of Job Polarization By Albertini, Julien; Langot, François; Sopraseuth, Thepthida
  11. The Effects of Subsidies on Firm Size and Productivity By Bearzotti, Enia; Polanec, Sašo; Bartolj, Tjaša
  12. Employment polarization: evidence from regions in Greece By Roupakias, Stelios

  1. By: Jan Fagerberg (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: This chapter analyses the ongoing global green shift from an evolutionary (Schumpeterian) perspective. Understanding such large techno-economic shifts, their causes, dynamics, and implications, has been a recurrent theme in evolutionary economics, from Schumpeter onwards. Following this perspective, what primarily characterizes large techno-economic shifts is that the radical changes they entail concern not just one but a whole range of industries and sectors, including ways of life, the organization of work, and infrastructure. The driving forces behind such shifts, according to Christopher Freeman, Carlota Perez and other contributors to the literature, are key inputs (or factors) characterized by rapidly declining costs, almost unlimited supply, and very broad applicability. This chapter argues that the global green shift, currently unfolding, is a techno-economic shift of a similar (or even larger) magnitude as the earlier shifts discussed by Freeman and Perez and others. The analysis shows that the green shift is driven by interaction of innovations in three interrelated areas, that is, renewable energy innovation; innovation in energy-using sectors; and energy infrastructure innovation, e.g., energy storage and distribution. A number of key innovations from these three areas are identified and their development and spread during the last hundred years or so explored. Particular attention is given to the various factors, including policy, that have influenced these processes. Finally, the lessons for policymaking supporting the global green shift are considered.
    Date: 2023–09
  2. By: William R. Kerr
    Abstract: We study the relationship between firm centralization and organizational reproduction in satellite locations. For decentralized firms, the ethnic compositions of inventors in satellite locations mostly resemble their host cities, with little link to the inventor composition of their parent firms' R&D headquarters. For highly centralized firms, by contrast, organizational reproduction has an explanatory power equal to half or more of the host city effect. Reproduction is strongest when a firm exhibits a hands-on approach to the satellite facility, such as cross-facility team collaboration or internal talent mobility.
    JEL: F22 F23 J61 L22 L25 M51 O31 O32 R11 R12
    Date: 2023–09
  3. By: Yan Bai; Keyu Jin; Dan Lu
    Abstract: What are a country's policy options in the face of emerging technologies development in a global economy? To answer this question, we examine optimal dynamic policies in an open economy where technology is endogenously accumulated through R&D innovation. Our key insight is that a country has incentives to influence foreign innovation efforts across sectors and over time---giving rise to optimal policies even when the private innovation allocations are (Pareto) efficient. We derive explicit expressions for optimal taxes linked to both an intratemporal and an intertemporal motive to manipulate foreign technology. A country would want to levy higher tariffs in sectors in which it has a comparative advantage, at the same time invoking domestic innovation subsidies during transition. By contrast, optimal policies under exogenous technology call for uniform tariffs across sectors and no innovation policies.
    JEL: E23 F12 F63 O38
    Date: 2023–09
  4. By: Richard Baldwin; Toshihiro Okubo
    Abstract: Digital technology is reshaping workplaces by enabling spatial separation of offices, known as telework, or remote intelligence (RI), and by facilitating automation of service sector tasks via artificial intelligence (AI). This paper is a first attempt to empirically investigate whether AI and RI are complements or substitutes in the service sector. It uses a worker-level panel of surveys collected from around 10, 000 workers from pre-COVID-19 pandemic to late 2022, we find preliminary evidence that suggests that AI and RI are complements rather than substitutes. The evidence comes first from the positive correlation of investments in AI-promoting and RI-promoting software at the firm and worker level, and second from the positive correlation of workers' expectations regarding telework and software automation. The evidence is far from definitive but suggests that the complement-substitution question is a fruitful line for future research.
    JEL: F6
    Date: 2023–08
  5. By: Katharina Hartinger (Johannes Gutenberg-University Mainz, Germany)
    Abstract: Individualist societies are more innovative, but little is known about the underlying individual behaviors. I use international labor-market and patent data to show that individualism—the cultural dimension that emphasizes individual achievements over collective action—positively affects individual innovation. Comparing migrants from different cultural origins within the same destination country and using variation in individualism at the country, region, and person level, I find that more individualist migrants select into more innovative occupations—including research, creative jobs, and ambitious entrepreneurship. Individualists also engage more readily in knowledge diffusion on the job—even when accounting for occupational selection—by investing more time in active learning. Taken together, those innovation choices account for 44 percent of the individualism productivity premium. Individualism also positively affects patenting behavior as a direct innovation output measure.
    JEL: O31 D91 J24 Z13
    Date: 2023–09–27
  6. By: Filippo Biondi (KU Leuven and Research Foundation Flanders (FWO)); Sergio Inferrera (Queen Mary University of London); Matthias Mertens (Halle Institute for Economic Research (IWH) and the Competitiveness Research Network (CompNet)); Javier Miranda (Halle Institute for Economic Research (IWH) and the Competitiveness Research Network (CompNet))
    Abstract: We study the changing patterns of business dynamism in Europe after 2000 using novel micro-aggregated data that we collect for 19 European countries. In all of them, we document a decline in job reallocation rates that concerns most economic sectors. This is mainly driven by dynamics within sectors, size classes, and age classes rather than by compositional changes. Large and mature firms show the strongest decline in job reallocation rates. Simultaneously, the shares of employment and sales of young firms decline. Consistent with US evidence, firms’ employment changes have become less responsive to productivity. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive a firm-level framework that relates changes in firms’ productivity, market power, and technology to job reallocation and firms’ responsiveness.
    Keywords: Business dynamism, productivity, responsiveness of labor demand, market power, European cross-country data, technological change
    JEL: D24 J21 J23 J42 L11 L25
    Date: 2023–10–25
  7. By: Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
    Abstract: This paper investigates a unique policy designed to maintain employment during the privatization of East German firms after the fall of the Iron Curtain. The policy required new owners of the firms to commit to employment targets, with penalties for non-compliance. Using a dynamic model, we highlight three channels through which employment targets impact firms: distorted employment decisions, increased productivity, and higher exit rates. Our empirical analysis, using a novel dataset and instrumental variable approach, confirms these findings. We estimate a 22% points higher annual employment growth rate, a 14% points higher annual productivity growth, and a 3.6% points higher probability of exit for firms with binding employment targets. Our calibrated model further demonstrates that without these targets, aggregate employment would have been 15% lower after 10 years. Additionally, an alternative policy of productivity investment subsidies proved costly and less effective in the short term.
    Keywords: industrial policy, privatizations, productivity, size-dependent regulations
    JEL: D22 D24 J08 L25
    Date: 2023
  8. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: Mission-oriented innovation policies are becoming increasingly popular among policymakers and scholars. We maintain that these policies are based on an overly mechanistic view of innovation and economic growth, suggesting that a more bottom-up approach is called for. By invoking an entrepreneurial ecosystem perspective, we point out that innovative entrepreneurship requires many other actors―besides the entrepreneur―whose skills and abilities are necessary to realize an entrepreneurial project. When mission-oriented policies play a large role in the economy, connections between actors in the ecosystem risk becoming distorted. A functioning and well-balanced entrepreneurial ecosystem requires instead an institutional framework that levels the playing field for potential entrepreneurs and encourages productive entrepreneurship. To promote this kind of system, we discuss in more detail eight key areas where appropriate horizontal or bottom-up policy measures can foster innovation and, in the end, the welfare-enhancing productive entrepreneurship policymakers and scholars strive for.
    Keywords: Collaborative innovation bloc; Entrepreneurial ecosystem; Entrepreneurship policy; Institutions; Public choice
    JEL: H50 L26 O31 P16
    Date: 2023–09–28
  9. By: Crescenzi, Riccardo; Harman, Oliver
    Abstract: The fragmentation of production offers new opportunities to economies seeking to take part in global value chains (GVCs). With the help of foreign direct investment (FDI), some economies are shifting their GVC participation to an increasing number of higher value-added tasks. Bangalore - dubbed as the 'Silicon Valley' of India and one of the world's fastest growing regions - owes its success in part to policies that are sensitive to international developments and global value chains, and make the most of dynamic specialization and foreign direct investment. The two key factors – GVCs and FDI – created an ecosystem that enabled the region's economic ‘upgrading’. Following Bangalore’s precedence, the reconfiguration of FDI networks and GVCs offers much promise to other cities and regions across Asia. This report by Riccardo Crescenzi of London School of Economics and Oliver Harman of the University of Oxford sets out to build a wider evidence base for tackling the opportunities and challenges related to this reconfiguration. By offering a critical review of existing scholarly and policy literature on global value chains in Asia, the authors present in a systematic and critical manner the evolution of GVCs and their link to FDI and economic development. The report also examines the role of different types of firms and regions, the heterogeneous subnational geography of GVC functions, and the links between GVC indicators and regional indicators based on FDI. Lastly, in light of the conceptual and empirical gaps, the report sketches a policy framework designed to guide debates and public policies in Asia.
    JEL: F3 G3 L81 N0
    Date: 2022–06–07
  10. By: Albertini, Julien; Langot, François; Sopraseuth, Thepthida
    Abstract: The US and French job polarization appear similar based on employment shares by task. This study shows that they are different when per capita employment by task is used to identify the sources of these structural changes. We build a multi-sectorial general equilibrium model with search frictions, endogenous layoffs, and occupational choices to estimate the relative impact of TBTC (Task-Biased Technological Change) and LMI changes (Labor Market Institutions) on employment patterns. Our analysis suggests that job polarization is mainly driven by TBTC in the US, whereas LMI changes drive job polarization in France.
    Keywords: job polarization, search and matching, labor market institutions, task-biased technological change
    Date: 2023–09
  11. By: Bearzotti, Enia; Polanec, Sašo; Bartolj, Tjaša
    Abstract: This paper evaluates the impact of varying subsidy sizes and distinct program objectives on firm size and performance. The magnitude of treatment effects increases with subsidy size, although the marginal effects tend to decrease. We also find that treatment effects differ across subsidy programs due to their distinct objectives. Among these, labor-support measures are most effective at supporting employment, capital, and output while being most harmful to productivity. Contrary to theory, subsidies providing incentives for investments have no impact on capital or productivity. The treatment effects tend to decrease over time and are thus temporary. As recipient firms are more likely to receive additional support in the future, the effects of subsidies accumulate giving rise to permanent differences between subsidized and non-subsidized firms. However, the lack of productivity improvements in such firms questions the benefits of repeated supporting measures.
    Keywords: Subsidies, Firm Growth, Firm Performance, Industrial Policy
    JEL: H25 L25 L52
    Date: 2023–09–06
  12. By: Roupakias, Stelios
    Abstract: This study first provides evidence compatible with the idea of employment polarization in the Greek labour market since the early 1990s. Then, using an instrumental variables approach, it uncovers the potential role of routine biased technological change in explaining these developments in the employment structure. The empirical results consistently suggest that employment has polarized more into regions with a higher initial routine share. Overall, the impact of technology on the employment rate is negligible, implying that the expansion of non-routine manual employment fully compensates for the destruction of jobs in middling, routine occupations.
    Keywords: Polarization, Labour Market, Employment
    JEL: J0 J2
    Date: 2023–09–25

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