Productivity and Innovation

Julián Messina, Oskar Nordström Skans, Mikael Carlsson, 23 October 2016

While standard microeconomic theory suggests that firms have no power over setting wages when markets are perfectly competitive, this view obviously clashes with the perceptions of the casual observer. This column uses data from Sweden to investigate the extent to which differences in firms’ pay are related to differences in physical productivity. It finds that firms that benefit from positive productivity shocks increase the wages of incumbent workers, and in particular firms among which there is substantial labour mobility. The evolution of productivity among such firms appears to be a crucial determinant of workers’ wages.

Harald Hau, Yi Huang, Gewei Wang, 17 October 2016

Business book writers claim that management quality of some type matters when creating successful firms. But this conventional wisdom has largely defied serious empirical analysis. This column looks at statistical evidence on the productivity response of Chinese firms to minimum wage shocks, and finds that better-managed firms adapt better to adverse competitive shocks. This suggests that management quality matters for this type of adaptability

Lars Boerner, Battista Severgnini, 10 October 2016

The public mechanical clock, which first appeared in European cities in the late 13th century, was one of the most important innovations in history. This column looks at the impact on growth of the arrival of this general purpose technology. European cities that were quick to install mechanical clocks enjoyed greater growth than late adopters. However, it takes some time for the effects from fundamental innovations of this type to be realised because the technology must be accepted both culturally and socially and then applied to related economic activities.

Ian Goldin, Chris Kutarna, 04 October 2016

Some economists see currently faltering GDP growth as part of a longer-term trend for advanced economies, reflecting their belief that the bulk of technological innovation is now behind humankind. This column argues that neither history nor the present-day pace of scientific discovery supports the notion of diminishing returns to technological innovation. The challenge for growth economists is that analytic models are poorly suited to capturing and setting society’s expectations for these impending disruptions.

James Bessen, 22 September 2016

A popular notion is that computer automation leads to major job losses. However, this ignores the dynamic economic responses that involve both changing demand and inter-occupation substitution. Using US data, this column explores the effect of automation on employment growth for detailed occupational categories. Computer-using occupations have had greater job growth to date, while those using few computers suffer greater computer-related losses. The real challenge posed by automation is developing a workforce with the skills to use new technologies.

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