Recent political events have highlighted a growing anti-globalisation sentiment, evident in scepticism towards free trade and resistance to immigration. However, existing analyses focus on short-term, local effects. Using global data, this column takes account of the complex relations between trade, migration, innovation, and growth. Liberal trade and immigration stances are found to have positive effects on global output. The results suggest that globalisation remains a tremendously powerful engine of growth.
Klaus Desmet, Dávid Krisztián Nagy, Esteban Rossi-Hansberg, 30 November 2016
Federica Coelli, Andreas Moxnes, Karen-Helene Ulltveit-Moe, 21 November 2016
Free trade is under fire, with evidence documenting the distributional impacts and labour adjustment costs of trade liberalisation mounting. This column instead presents new evidence on the benefits of freer trade in terms of growth and innovation. It points to gains that could be lost if support for globalisation is not maintained.
Emmanuele Bobbio, 05 November 2016
Tax evasion imposes substantial costs on economies around the world. Beyond equity concerns, it erodes the tax base, with indirect effects on public investment and service provision. This column uses a model calibrated on the Italian economy to assess the direct and indirect effects of tax evasion on economic growth. Enforcing taxes would force small businesses to innovate, putting pressure on larger businesses and clearing the market of poorly performing small firms. Tackling tax evasion is thus important not only for equity reasons, but also for efficiency.
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.
Monika Schnitzer, 30 September 2016
How do patents affect innovation? In this video, Monika Schnitzler uses the example of Bell labs to explain how compulsory licensing leads to more innovation. This video was recorded during the European Economic Association's Congress held in Geneva at the end of August 2016.
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.
Fabrizio Zilibotti, 21 September 2016
Can China shift to innovation-led growth after decades of investment-led growth? In this video, Fabrizio Zilibotti presents his research on what China could do and the implications for the rest of the world. This video was recorded during the European Economic Association's Congress held in Geneva at the end of August 2016.
Philippe Aghion, Ufuk Akcigit, Julia Cagé, William Kerr, 29 August 2016
The relationship between taxation and economic growth is complex, and relies in large part on the efficiency with which taxes are used. This column examines the impact of corruption on this relationship. The boost to welfare from reducing corruption is substantially larger than the marginal gains from optimising the tax rate for an existing level of government efficiency.
Charles Angelucci, Julia Cagé, 26 August 2016
Advertisers are deserting newspapers. Using the impact of television advertising on print media in 1968, this column argues that a reduction in advertising revenues will reduce the quality of newspapers. Ultimately, this may result in a less well-informed public.
Nobuya Fukugawa, Akira Goto, 08 July 2016
Local public technology centres (Kosetsushi) in Japan have demonstrated notable success in fostering the development of regional industries. This column reports the results of the first branch-level survey of Kosetsushi, focusing on three areas: manufacturing, foods, and design. Kosetsushi are found to help clients through diverse, tailored technical consultations and, increasingly, by acting as a network hub for the transfer of symbolic and analytical knowledge. These findings have particular relevance for regional governments attempting to foster innovation through similar institutions.
Daron Acemoglu, Pascual Restrepo, 05 July 2016
Many economists throughout history have been proven wrong in predicting that technological progress will cause irreversible damage to the labour market. This column shows that so far, the labour market has always adapted to the replacement of jobs with capital, using evidence of new types of skilled jobs between 1970 and 2007. As long as the rate of automation of jobs by machines and the creation of new complex tasks for workers are balanced, there will be no major labour market decline. The nature of new technology, and its impact on future innovation potential, has important implications for labour stability.
Daron Acemoglu, Jacob Moscona, James Robinson, 27 June 2016
The ‘great inventions’ view of productivity growth ascribes the excellent growth from 1920 to 1970 in the US to a handful of advances, and suggests that today poor productivity performance is driven by a lack of breakthrough discoveries. This column argues instead that the development of an effective governmental infrastructure in the 19th century accounted for a major part of US technological progress and prominence in this period. Infrastructure design thus appears to have the power to reinvigorate technological progress.
Andrew Bernard, Valerie Smeets, Frederic Warzynski, 22 June 2016
Deindustrialisation is a major policy concern in high-income countries not only because of resulting unemployment, but also because of the long-run implications for growth. This column uses evidence from Denmark to analyse whether it is being measured in the right way. A substantial fraction of the decline in manufacturing actually reflects the changing nature of production. Service sector firms that still perform many of the value-adding activities of traditional manufacturing firms should not be overlooked by policymakers.
Francisco Buera, Ezra Oberfield, 12 June 2016
Free trade often comes hand in hand with economic growth. The opportunity for gain is relatively small, according to quantitative models that rely on standard static mechanisms. This column introduces a model to study the diffusion of ideas across countries as a means of increasing productivity, and a quantitative assessment of the role of trade in the transmission of knowledge. How much the transmission of knowledge will impact productivity depends on the openness of the trading countries, current stock of knowledge, and a diffusion parameter.
Ross Levine, Chen Lin, Lai Wei, 27 May 2016
Economic theory offers conflicting perspectives on the relationship between insider trading and innovation. To date, the empirical evidence is similarly inconclusive. This column exploits the staggered enforcement of inside trading laws across countries to explore the effect on patenting behaviour. The findings point to a robust positive effect of enforcement on various measures of patenting behaviour. Legal systems that protect outside investors from corporate insiders thus help to foster innovation.
Santiago Caicedo, Robert Lucas, Esteban Rossi-Hansberg, 14 May 2016
A large part of people’s wages rewards the knowledge embedded in them that they use in a production endeavour. Knowledgeable individuals specialise in hard, complicated tasks, while less knowledgeable ones specialise in simpler, more common tasks. This column uses a dynamic model of knowledge accumulation over time and career paths to find an underlying cause for wage inequality in the US over the last few decades. A good explanation for the wage inequality is the discrepancy between the rate of technological change and the rate at which the distribution of knowledge catches up.
Andrew Bernard, Toshihiro Okubo, 23 April 2016
Recent research has found that certain firms increase their innovative activity during periods of falling demand. This column investigates this puzzle by analysing how Japanese firms adjust their product mix over the business cycle. During transitions from recession to expansion, firm-level product churning – that is, simultaneously adding and dropping products – increases by 25%. The findings lend support to the ‘trapped factor’ model, in which negative demand shocks see the redeployment of underemployed resources towards innovation processes.
Bronwyn Hall, Christian Helmers, Georg von Graevenitz, 23 April 2016
Patent filings have proliferated globally in recent years. While some may see this as a direct consequence of increased innovation, this column uses evidence from the UK to show that patent thickets – patents belonging to many companies protecting overlapping technology – reduce innovation. Patent thickets decrease entry (i.e. first time patenting in an area) by 20%, which is substantial bearing in mind that the average probability of entry into a technology area is only about 1.5%.
Rune Fitjar, Andrés Rodríguez-Pose, 11 April 2016
Geographic proximity between innovating actors has been shown to facilitate knowledge transfers and spillovers. However, the degree to which these effects are driven by serendipitous encounters has yet to be examined. This column explores this issue for a sample of Norwegian firms. Of the relationships that help firms innovate, fewer than 10% are formed in purely casual circumstances. The results imply that knowledge isn’t so much ‘in the air’; transfers usually result from purposeful search.