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on Technology and Industrial Dynamics |
| By: | Garg, Prashant (Bocconi University); Lambert, Peter John (University of Warwick & London School of Economics); Martin, Ralf (Imperial College London, Centre for Economic Performance and CEPR); Medvedev, Denis (World Bank) |
| Abstract: | This paper pilots a method for measuring firms' product and process innovation at scale. Our approach uses LLMs to complete a detailed innovation survey for a sample of 600, 000 companies operating across 40 countries. The preliminary results contain 6 million individual instances of innovative activity along with rich textual descriptions. These responses carry signal, for example a one-standard-deviation increase in a firm's product innovation index is associated with a 5% higher measured TFP residual. The data reveal that innovation is widespread: two-fifths of companies engage in product innovation and one-quarter in process innovation, far exceeding the share of patenting firms. Firms are more likely to have labor-augmenting than labor-saving introductions, while about 14% have green product in novation and 12% have green process innovation. Greenness and net labor augmentation are positively associated across countries. Beyond our specific application, this paper illustrates the potential for using LLMs to generate survey-level insights at population scale. |
| Keywords: | Innovation direction; Green innovation; Automation; LLMs; AI measurement; Patents JEL Classification: O30; O31; O33; O34; Q55; J24 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:825 |
| By: | Gert Bijnens; Anders Humlum; Stijn Vanormelingen |
| Abstract: | New machinery has long been argued to raise the relative demand for skilled labor, yet firm-level evidence finds no such shift at investing firms. We resolve this puzzle by looking beyond firm boundaries. Linking Belgian data on capital investments, buyer–supplier transactions, and worker skills, we show that the skill bias of new machinery arises entirely at external suppliers. Following machinery investment spikes, purchases from suppliers raise firms’ total demand for high-STEM workers by 45%, three times the rise for other skill groups, while in-house hiring raises it by less than 5%, evenly across skill groups. This external demand comes first from machine integrators and later from complementary services such as software, and is stronger for smaller firms, lumpier investments, and rapidly advancing capital, consistent with fixed and adjustment costs of hiring high-STEM workers in-house. In a general-equilibrium model estimated on our event studies, the rise in machinery per worker from 2003 to 2021 raises relative demand for high-STEM workers by 8.8 log points and their wage premium by 3.1. Measured on payrolls alone, both would fall. |
| JEL: | E22 J23 J24 J31 L24 O33 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35857 |
| By: | Marco Due\~nas; Antoine Mandel |
| Abstract: | A growing number of countries are adopting policies to reduce greenhouse-gas emissions, a process expected to reshape production systems and labour markets by altering relative prices and changing production and demand patterns across sectors. We develop an agent-based monetary input--output network model to analyse the medium-term effects of climate policies on production networks and sectoral labour allocation. The model features heterogeneous industries and households, incorporates greenhouse-gas emissions accounting, and is calibrated to a multi-regional input--output database covering the world economy. We simulate two alternative climate-policy scenarios over 2026--2035: one based on countries' nationally determined contributions and another targeting larger reductions in global emissions. The results reveal significant economy-wide reallocation: fossil-energy sectors contract, low-carbon energy sectors expand, and their positions within production networks change asymmetrically. Fossil energy loses relevance as a direct supplier and exerts less forward influence, while its remaining production becomes more dependent on intermediate inputs and upstream suppliers; low-carbon energy primarily strengthens its role as a supplier. Carbon pricing also generates sectoral labour gaps that, under mobility frictions, imply greater potential transitional unemployment. Because the model allows only limited technological change and adjustment within existing production links, the simulations provide a counterfactual assessment of how existing production structures respond to a relatively rapid climate transition, revealing the adjustment pressures that emerge when policy ambitions advance faster than the productive system's capacity to adapt. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.04018 |
| By: | Thomas Drechsel; Daniel Lewis; Davide Melcangi; Laura Pilossoph |
| Abstract: | To study monetary policy transmission at the firm level, researchers typically consider heterogeneity along a small number of firm characteristics, such as size or leverage. We instead estimate the full distribution of firms’ investment responses to monetary policy, using a clustering regression framework. Our novel approach captures multidimensional and unobservable heterogeneity across firms and time. We find that investment by most firms in most time periods responds little to monetary policy. Only about 5% of firm-time observations are associated with a strong response. We then investigate the sources of heterogeneity ex post. We find that most of the variation in investment sensitivity arises within firms over time. Although several firm characteristics predict responsiveness to monetary policy, the majority of heterogeneity remains unexplained by firm observables. We demonstrate that our empirical estimates provide new targets for disciplining structural models of firm heterogeneity. |
| JEL: | D25 E22 E32 E52 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35867 |
| By: | Omer Edhan; Ziv Hellman |
| Abstract: | When does automation become an economically self-sustaining process? We define \emph{automation breakaway} as the condition under which saving generated by physical capital and artificial labour is sufficient to finance continued automation. Artificial labour is labour-like in production but capital-like in accumulation, creating an income base that can support further investment. We characterise breakaway and its dynamic viability, showing that productivity and factor-income composition provide distinct financing channels. Artificial-labour accumulation strengthens the saving base supporting breakaway, while its effect on labour income changes sign with substitutability with human labour. Near full automation, aggregate labour income can contract through fewer human-filled jobs while average labour income in surviving jobs remains positive or rises. Optimal reliance on worker finance can begin to decline while it still provides a positive current net benefit. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.06296 |
| By: | Irlenbusch, Bernd; Laske, Katharina; Schröder, Marina; Stoczek, Rika |
| Abstract: | How firms generate and select ideas influences their strategic path and the development of entire industries. To better understand this process, we experimentally analyze the impact of knowledge on idea generation and selection in an incentivized ideation task. Between treatments, we vary whether or not ideators are provided with examples of previous successful ideas before working on the task. We provide causal evidence that knowledge about such example ideas leads to path dependencies, i.e., knowledge increases the similarity of new ideas to those provided. Consistent with the hypothesis that knowledge affects the search for new ideas, we find evidence of path dependencies during idea generation, but do not find statistically significant evidence of additional path dependencies during idea selection. Overall, when knowledge is provided, we observe an increase in selected innovative ideas that are similar to previous ideas and a decrease in selected innovative ideas that are different from previous ideas. |
| Keywords: | idea generation;idea selection;innovation;knowledge;path dependency;real-effort experiment |
| JEL: | R14 J01 J50 |
| Date: | 2026–09–28 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:141263 |
| By: | Gilbert Cette (NEOMA - Neoma Business School); Jimmy Lopez (LEDi - Laboratoire d'Economie de Dijon [Dijon] - UB - Université de Bourgogne - UBFC - Université Bourgogne Franche-Comté [COMUE], UBE - Université Bourgogne Europe); Jacques Mairesse (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique); Giuseppe Nicoletti (LUISS - Libera Università Internazionale degli Studi Sociali Guido Carli [Roma]) |
| Abstract: | This study investigates empirically how differences in managerial practices shaped the macroeconomic recovery from the 2008 Great Recession. We build a country-industry panel over the 2007-2015 period for eighteen industries in nine OECD countries, using an indicator of management quality at the country level based on the categorical scores of managerial practices collected at the firm level by Bloom et al. (2012) and an indicator measuring the industry level shocks caused by the 2008 economic crisis. We then rely on the local projection method pioneered by Jordà (2005) to estimate the impact of the shocks on post-2009 macro developments at different levels of managerial quality. We find that both production and employment were more resilient in countries where management quality is higher, resulting in no significant cumulative impact of management quality on productivity over the recovery. The effects of management on production and employment resilience are stronger for industries deeply affected by the 2008 crisis and go along with wage moderation and a slight increase in the labour share. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05718405 |