Productivity and Innovation

Margaret Kyle, David Ridley, Su Zhang, 14 December 2017

Governments use various tools to promote scientific research, and the resulting innovations or knowledge can cross borders. This column examines whether governments and organisations adjust their funding of medical research in response to the funding decisions of others. The results suggest an increase in US government funding is associated with a decrease in funding by others. While this evidence is consistent with free riding, qualitative evidence suggests it reflects the optimal reallocation of funds.

Atsushi Ohyama, 14 December 2017

The length of time industries prosper varies significantly. This column examines why some industries grow and prosper for a long period of time through the lens of submarket creation and destruction. Using data from the Japanese Census of Manufacture, it shows that the creation and the destruction of products allow an industry to continue attracting new entrants, that start-up and spinoff firms are more likely to enter a newly created submarket than incumbent firms, and that new entry is encouraged when unrealised business opportunities are reallocated smoothly.

Katja Mann, Lukas Püttmann, 07 December 2017

Researchers disagree over whether automation is creating or destroying jobs. This column introduces a new indicator of automation constructed by applying a machine learning algorithm to classify patents, and uses the result to investigate which US regions and industries are most exposed to automation. This indicator suggests that automation has created more jobs in the US than it has destroyed.

David Baqaee, Emmanuel Farhi, 04 December 2017

Mounting evidence suggests that average mark-ups in the US economy have been increasing. This column argues that about half of measured aggregate productivity growth over the last 20 years can be accounted for by firms with higher mark-ups increasing their relative size. This implies that the slowdown in pure technology growth is even slower than suggested by aggregate productivity statistics. Eliminating mark-ups would increase the productivity of the US economy by about 40%.

Xavi Cirera, Edwin A. Goñi Pacchioni, William Maloney, 29 November 2017

Innovation is widely seen as central to the growth of developing countries, and available evidence suggests that the returns to R&D investment should be extremely high.  Yet low-income countries invest very little. This column suggests that this is due to the increasing scarcity of a wide array of factors complementary to innovation, and that this explains the lack of convergence of low-income countries to the technological frontier.    

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