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on Technology and Industrial Dynamics |
| By: | Evgenidis Anastasios; Fasianos Apostolos; Papapanagiotou George; Lazarou Nicholas Joseph (European Commission - JRC) |
| Abstract: | Recent advances in Artificial Intelligence (AI) and the growing role of these technologies in enhancing productivity have attracted significant research and policy attention, yet the determinants of AI innovation remain relatively understudied. This study contributes to this emerging literature by examining the role of public R&D spending in fostering AI-related innovation across EU regions. Our analysis draws on bibliographic information from all patents registered at the European Patent Office (EPO) between 1980 and 2023. Using textual analysis of patent abstracts, we identify the share of AI patents among total patents and construct a novel dataset that allocates AI patents to NUTS-2 regions based on inventor addresses. This regional mapping enables us to assess the impact of public R&D funding on AI innovation while addressing endogeneity concerns by instrumenting regional public R&D spending with national defence-related R&D expenditure. The results show that public R&D plays a significant role in driving AI innovation: a 1% increase in public R&D spending raises AI patent output by approximately 0.27%. These findings speak directly to Europe’s innovation policy framework, providing evidence that public investment remains a powerful lever for stimulating AI development. They also reinforce the rationale for sustained funding under Horizon Europe, the Digital Europe Programme, and national innovation strategies aimed at building technological and reducing regional disparities in AI advancement. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:termod:202512 |
| By: | Yueyuan Ma |
| Abstract: | Using firm-level data from the US Census Longitudinal Business Database (LBD), this paper exhibits novel evidence about a wave of specialization experienced by US firms in the 1980s and 1990s. Specifically: (i) Firms, especially innovating ones, decreased production scope, i.e., the number of industries in which they produce. (ii) Innovation and production separated, with small firms specializing in innovation and large firms in production. Higher patent trading efficiency and stronger patent protection are proposed to explain these phenomena. An endogenous growth model is developed with potential mismatches between innovation and production. Calibrating the model suggests that increased trading efficiency and better patent protection can explain 20% of the observed production scope decrease and 108% of the innovation and production separation. They result in a 0.64 percent point increase in the annual economic growth rate. Empirical analyses provide evidence of causality from pro-patent reforms in the 1980s to the two specialization patterns. |
| Keywords: | specialization, production scope, R&D, intellectual property rights, patent trade, endogenous growth |
| JEL: | E23 L22 O32 O34 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-77 |
| By: | Jian, Wenze; Lu, Hang; Yang, Zimo; Zhong, Ziqi |
| Abstract: | Using data on Chinese A-share listed firms and regions from 2011–2023, this paper employs a difference-in-differences (DID) framework to evaluate the productivity returns to artificial intelligence (AI) application from both firm-level and societal perspectives. The findings are as follows: First, AI intensity significantly increases firms' total factor productivity (TFP). Second, AI intensity significantly increases social TFP. Third, green financial innovation exerts a significant positive mediating effect on the pathway from AI intensity to firm TFP. Fourth, green financial innovation also partially mediates the pathway from AI intensity to social TFP. Substantively, the paper links micro-level firm transformation with macro-level regional performance, providing empirical evidence and policy implications for understanding the transmission mechanism from digitalization to greening to high-quality growth. |
| Keywords: | AI intensity; TFP; green financial innovation |
| JEL: | F3 G3 J50 |
| Date: | 2026–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130473 |
| By: | Joshua S. Gans; Avi Goldfarb |
| Abstract: | We study automation when tasks are quality complements rather than separable. Production requires numerous tasks whose qualities multiply as in an O-ring technology. A worker allocates a fixed endowment of time across the tasks performed; machines can replace tasks with given quality, and time is allocated across the remaining manual tasks. This “focus” mechanism generates three results. First, task-by-task substitution logic is incomplete because automating one task changes the return to automating others. Second, automation decisions are discrete and can require bundled adoption even when automation quality improves smoothly. Third, labour income can rise under partial automation because automation scales the value of remaining bottleneck tasks. These results imply that widely-used exposure indices, which aggregate task-level automation risk using linear formulas, will overstate displacement when tasks are complements. The relevant object is not average task exposure but the structure of bottlenecks and how automation reshapes worker time around them. |
| JEL: | J23 J24 O33 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34639 |
| By: | Giovanna Ciaffi; Matteo Deleidi; Mariana Mazzucato |
| Abstract: | This paper investigates the macroeconomic effects of public R&D investment in the US economy from 1947 to 2018, employing alternative empirical approaches based on Structural VARs, pure shocks derived from a counterfactual VAR, and Instrumental-Variable Local Projections. The analysis provides robust evidence consistent with the findings of Deleidi and Mazzucato (2021), confirming that public R&D exerts strong and persistent expansionary effects on economic activity. Examining the fiscal policy transmission mechanisms, the results indicate that public R&D generates significant crowding-in effects on private R&D, non-residential investment, and consumption, thereby supporting the existence of a Supermultiplier effect. When total public R&D is broken down into military and civil components, and pure shocks are estimated, both spending categories yield statistically similar macroeconomic effects. Finally, sub-sample analyses confirm our findings and show that the magnitude of public R&D multipliers remains broadly comparable over time. Overall, the findings highlight the macroeconomic importance of public R&D as an effective tool for sustaining long-term economic growth. |
| Keywords: | Public R&D; Fiscal multipliers; Mission-Oriented Innovation policy; Structural VAR; Local projections |
| JEL: | C32 E11 E62 O30 O25 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:imk:fmmpap:122-2026 |
| By: | Katharina Ledebur. Ladislav Bartuska; Klaus Friesenbichler; Peter Klimek |
| Abstract: | The automotive industry is undergoing transformation, driven by the electrification of powertrains, the rise of software-defined vehicles, and the adoption of circular economy concepts. These trends blur the boundaries between the automotive sector and other industries. Unlike internal combustion engine (ICE) production, where mechanical capabilities dominated, competitiveness in electric vehicle (EV) production increasingly depends on expertise in electronics, batteries, and software. This study investigates whether and how firms' ability to leverage cross-industry diversification contributes to competitive advantage. We develop a country-level product space covering all industries and an industry-specific product space covering over 900 automotive components. This allows us to identify clusters of parts that are exported together, revealing shared manufacturing capabilities. Closeness centrality in the country-level product space, rather than simple proximity, is a strong predictor of where new comparative advantages are likely to emerge. We examine this relationship across industrial sectors to establish patterns of path dependency, diversification and capability formation, and then focus on the EV transition. New strengths in vehicles and aluminium products in the EU are expected to generate 5 and 4.6 times more EV-specific strengths, respectively, than other EV-relevant sectors over the next decade, compared to only 1.6 and 4.5 new strengths in already diversified China. Countries such as South Korea, China, the US and Canada show strong potential for diversification into EV-related products, while established producers in the EU are likely to come under pressure. These findings suggest that the success of the automotive transformation depends on regions' ability to mobilize existing industrial capabilities, particularly in sectors such as machinery and electronic equipment. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.13178 |
| By: | Lei, Xinyuan; Shi, Guanming; Qiu, Huanguang; Wang, Shukun |
| Abstract: | Governments worldwide have been increasingly focused on how to foster innovation through regulatory frameworks, particularly in developing countries. In 2016, China revised the "Seed Law, " marked a shift from a control-based to a market-oriented framework. This study uses a difference-in-differences strategy to examine the impact of deregulation reform on firms' innovation in China's seed industry from 2013 to 2021. The results reveal a significant positive effect on innovation. We also found that the reform had a significantly greater impact on innovation quantity for larger firms compared to smaller ones, with results remaining robust across extensive checks. Mechanism analysis suggests that for large firms, the increase in approved varieties is driven by both short-term factors such as expanded approval channels and technology licensing, and long-term R&D investments. In contrast, for small firms, it primarily stems from short-term factors, with limited impact from long-term R&D efforts. Additionally, the reform increased innovation quantity without compromising quality for smaller firms, while further enhancing innovation quality among larger firms. |
| Keywords: | Agricultural and Food Policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360608 |
| By: | Alberto Bucci (University of Milan); Klaus Prettner (Department of Economics, Vienna University of Economics and Business); Jamel Saadaoui (Paris 8 University) |
| Abstract: | How will the widespread deployment of automation technologies such as industrial robots and artificial intelligence (AI) affect long-run economic performance? To address this question, we develop a model of economic growth for a fully automated economy in which output is produced with only two forms of capital: "traditional capital" (assembly lines, machines, etc.) and "robotic capital" (industrial robots, AI, etc.). In our setting, human labor is no longer competitive, and the central questions become how investment should be allocated across the two types of capital and how the degree of substitutability between them affects long-term economic growth. Using a two-level nested CES production structure (with no further assumptions), we characterize the competitive balanced growth path and the range of feasible long-run growth rates that a fully automated economy can attain. We show that the case of full automation can be consistent with the growth expectations of techno-optimists and the dynamics of economic growth along a balanced growth path depend on preference parameters, depreciation, and the degree of substitutability between robotic and traditional capital in both production and investment decisions. Our framework contributes to the debate on the economic consequences of automation and the extent to which this future is shaped by the underlying forces that determine the accumulation of traditional capital versus robotic capital. |
| Keywords: | Automation, Robots, Capital Accumulation, Substitutability of Capital, Balanced Growth |
| JEL: | E22 O33 O41 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp391 |
| By: | Álvarez, Inmaculada C.; Barbero, Javier; Orea, Luis; Rodríguez-Pose, Andrés |
| Abstract: | Most studies of institutional quality and regional growth assume uniform effects across territories. However, this may mask crucial regional heterogeneity, with direct policy implications. We use a latent class framework applied to 230 EU regions over 2009-2017 to identify institution-driven regional parameter groups, and to examine both average effects and catching-up effects associated with changes in the institutional environment. We demonstrate that institutional quality generates highly variable returns to investment in physical capital and innovation. Nordic and Central European regions show highest returns to physical capital and R&D investment, whereas less-developed regions benefit most from education spending. Crucially, we find that improving government quality not only raises average returns but also promotes territorial cohesion. By contrast, regional autonomy shows limited impact on returns. Our findings challenge the one-size-fits-all approach to cohesion policy and indicate that cohesion policy should explicitly promote institutional improvements in addition to capital deployment. |
| Keywords: | institutional quality; European funds; investment; regional development |
| JEL: | E61 H54 R11 |
| Date: | 2025–12–24 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130747 |
| By: | Banri ITO; Eiichi TOMIURA |
| Abstract: | This paper examines the effect of initiating cross-border data flows on firm productivity, using original survey data from Japanese manufacturing and service firms collected in 2019 and 2021, merged with annual productivity measures over 2019–2022. The survey identifies new entrants into cross-border data transfers, enabling a difference-in-differences design that compares “switchers†to firms that either do not collect data or collect data only domestically. We estimate the average treatment effect on the treated using regression-adjustment, inverse probability weighting, and doubly robust AIPW DID estimators, controlling for exporter status, multinational affiliation, R&D intensity, and ICT cost intensity. The results show that firms with higher initial productivity are more likely to start transferring data internationally, which is consistent with self-selection patterns documented in the export- and FDI-related literature. Entry into cross-border data flows is associated with significant productivity gains, which become particularly pronounced in the year after entry. These findings provide rare firm-level evidence from Japan, while also offering broader insights for data-governance debates by highlighting the potential productivity costs of overly restrictive cross-border data regulations. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25125 |
| By: | Kazuma EDAMURA; Tsutomu MIYAGAWA |
| Abstract: | Environment-related investments represent challenges for private sector firms due to uncertainty about their future impact on corporate value and capital formation. Previous empirical research has overlooked such incentive structures. Following the approach of Brynjolfsson, Rock and Syverson (2021), we estimated a firm value function with multiple assets including environment-related R&D as explanatory variables, based on the concept that associated costs of capital accumulation can contribute to future productivity improvements. Our estimation for manufacturing firms finds that environmental R&D contributes to firm value positively and significantly. These effects are particularly evident in large firms and those engaging in technology trade. This suggests that such investments facilitate technological accumulation to meet the demands of international consumers and regulatory frameworks. However, recent shifts in global policy such as the U.S. withdrawal from the Paris Agreement may weaken incentives for Japanese firms with close ties to U.S. markets. If Japan wants to continue to pursue policy that is aligned with the Paris Agreement, stronger government support for private sector environmental initiatives will be necessary. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25124 |
| By: | Chingri, Subhrasil; Mondal, Debasis; Prettner, Klaus |
| Abstract: | Can human capital accumulation mitigate the adverse effects of automation on the global labor share? To answer this question, we build two theoretical models-first an automation augmented growth model with exogenous human capital to illustrate the general effects of education in the context of automation; and then an automation augmented endogenous human capital accumulation framework in which individuals decide how much of their time they devote to education. We show that while automation puts downward pressure on the labor share, this downward pressure is reduced by human capital investment. Quantitatively, however, the effect of human capital accumulation in limiting the decrease in the labor share is rather small given actual data on the change in the use of industrial robots and in the years of schooling between 1990 and 2024. Achieving a full stabilization of the labor share requires unrealistically high and sustained investments in education. Our findings underscore the importance of education as a policy lever in the age of automation but they also clarify that education policies alone are insufficient given the challenges ahead. |
| Keywords: | Human capital; Automation; Labor Share; Economic Growth; Neoclassical Growth Model |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wus005:80178895 |
| By: | Albora Giambattista (European Commission - JRC); Benoit Florence; Caldarola Bernardo (European Commission - JRC); Di Girolamo Valentina; Diodato Dario (European Commission - JRC); Napolitano Lorenzo (European Commission - JRC); Sciarra Carla (European Commission - JRC) |
| Abstract: | Over the past 25 years, the world has witnessed a significant surge in patenting activity, underscoring the crucial role of frontier technologies in driving economic growth and competitiveness. While the EU remains a leading global innovator, its competitive edge is under threat. To address this challenge, the EU must create a vibrant industrial ecosystem that nurtures innovation. Advanced Materials, with their potential to transform industries and enable breakthrough innovations, are a crucial component of this ecosystem, and offer a unique opportunity to strengthen the EU's economic growth, competitiveness, strategic autonomy, and digital and green transformation. This report is intended to lend support to the implementation of EU policies aimed at revitalising the EU economy – such as the forthcoming Advanced Materials Act – by identifying areas where Europe can enhance its technological leadership. The analysis is grounded in the Economic Complexity approach, which provides a framework to analyse the existing technological capabilities of the EU, and to identify untapped diversification opportunities for the Member States and their regions. The results of this report suggest that the EU leadership in many traditional technologies is threatened by rising innovation activities by its main competitors, mainly China and the US. To close its innovation gap, the EU can leverage its existing capabilities to enhance competitiveness in Advanced Materials, particularly in areas such as Biomaterials, Glass, and Cements. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc144431 |
| By: | Borsekova, Kamila; Korony, Samuel; Rodríguez-Pose, Andrés; Styk, Michal; Westlund, Hans |
| Abstract: | The importance of institutions and innovation for regional development is well established. How these two factors interact under different historical legacies and urban-regional contexts remains, however, insufficiently understood. This paper identifies which combinations of institutional and innovation indicators most effectively classify regions into distinct developmental archetypes, revealing critical thresholds that redirect regional trajectories. Employing decision-tree analysis on 233 EU NUTS-2 regions, we analyse 15 indicators spanning institutional quality, technological readiness, business sophistication, and innovation. This methodology uncovers non-linear relationships that traditional approaches cannot capture. The findings demonstrate that institutional quality acts as a necessary condition for innovation-led growth. High-performing regions, predominantly in Western and Northern Europe, benefit from robust institutions and strong innovation outputs. Many lower-performing regions, particularly in Central and Eastern Europe, exhibit innovation potential but are constrained by governance deficits. By integrating institutional and innovation indicators within a single analytical framework, we underscore how addressing governance and innovation in tandem can result in balanced and sustainable growth across Europe. |
| Keywords: | regional development; institutions; innovation; decision tree modelling; regional competitiveness |
| JEL: | J1 |
| Date: | 2026–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130741 |