Productivity and Innovation

Ufuk Akcigit, John Grigsby, Tom Nicholas, 27 March 2017

The impact of immigration on US economic development has become a controversial issue in recent policy debates. This column, arising from a study linking Federal Census data with patent records, examines the historical role of immigrant inventors in the process of US technological innovation. Immigrant inventors appear to have been of central importance to American innovation during the 19th and 20th centuries, both through their own inventive activity and through their influence on domestic inventors.

Dan Andrews, Chiara Criscuolo, Peter Gal, 27 March 2017

Even before the Global Crisis, productivity growth had slowed in many OECD countries. This column argues that the global slowdown at the aggregate level masks a deterioration in both productivity growth within firms and a process of creative destruction. Using a cross-country firm-level database for 24 countries, the authors reveal an increasing productivity gap between the global frontier and laggard firms, fewer exits by weak firms, and a decline in entry. These problems have been compounded by the failure of policy to encourage the diffusion of best practices in OECD countries.

Chang-Tai Hsieh, Nicholas Li, Ralph Ossa, Mu-Jeung Yang, 26 March 2017

Trade economists typically believe that in addition to lower prices for imported goods, trade liberalisation also brings import variety and domestic productivity gains. This column accounts for these ‘new’ gains in a careful reconsideration of the Canada-US Free Trade Agreement. Although the agreement did see improvements in Canadian income associated with import variety and domestic productivity, these were far outweighed by the welfare loss associated with the reduction in domestic variety. Nonetheless, Canadian welfare did improve overall when one takes into account the ‘traditional’ gains associated with lower import prices.

William Maloney, Felipe Valencia Caicedo, 24 March 2017

The generation and diffusion of scientific knowledge and technology are assumed to be drivers of modern economic growth, but there is a lack of firm empirical evidence of this. This column uses the first detailed data on the density of engineers in the western hemisphere to argue that historical differences in innovative capacity, as captured by the density of engineers in 1880, explain a significant fraction of the Great Divergence. The results confirm the imperative of developing higher-order human capital.

David Autor, David Dorn, Gordon Hanson, Gary P. Pisano, Pian Shu, 20 March 2017

The discussion of the decline in US manufacturing during the 2016 presidential election campaign largely focused on job losses. This column examines the effects of Chinese import competition on another metric for the health of the US manufacturing sector – innovation.  Firms whose industries were exposed to a greater surge of Chinese import competition from 1991 to 2007 experienced a significant decline in their patent output as well as their R&D expenditures. While politicians’ ‘obsession’ with manufacturing is primarily due to job losses, an accompanying reduction in innovation may well affect economic growth in the longer term.

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