Productivity and Innovation

Sari Pekkala Kerr, William Kerr, 21 September 2018

There is a contentious global debate surrounding the impact of immigrants on local labour markets. One less contentious aspect has been the notion that immigrant entrepreneurs can have major positive effects for the host economy. This column uses novel US data to explore how immigrant entrepreneurs affect local labour markets and compare with native entrepreneurs. Key findings include substantial geographic variation in immigrant startup rates, lower hiring and salaries, and slightly higher female ownership in immigrant-owned firms. 

Giuseppe Berlingieri, Sara Calligaris, Chiara Criscuolo, 19 September 2018

The evidence that bigger firms pay higher wages and have higher productivity is mainly based on manufacturing, which nowadays accounts for a small share of the economy. Drawing on a unique micro-aggregated dataset, this column reveals that while the size premia for both wages and productivity are significantly weaker in market services than in manufacturing, the link between wages and productivity is stronger – the most productive firms at the top are not necessarily the largest ones in terms of employment, but they do pay the best. This increases the likelihood of productivity and wage gains being shared with fewer workers, a further challenge to achieving inclusive growth in the new service economy.

Erik Brynjolfsson, Xiang Hui, Meng Liu, 16 September 2018

Recent years have seen dramatic progress in the predictive power of artificial intelligence in many areas, including speech recognition, but empirical evidence documenting its concrete economic effects is largely lacking. This column analyses the effect of the introduction of eBay Machine Translation on eBay’s international trade. The results show that it increased US exports on eBay to Spanish-speaking Latin American countries by 17.5%. By overriding trade-hindering language barriers, AI is already affecting productivity and trade and has significant potential to increase them further.

Edward Glaeser, Ming Lu, 15 September 2018

Comparing China’s per-capita GDP growth to the growth in years of schooling suggests a large role for human capital externalities. This column uses changes in the location of Chinese university departments in the 1950s to estimate that an extra year of schooling has been associated with 22.0% higher hourly wages across cities. Even so, the growth of Chinese education cannot explain the country’s massive increase in earnings.

Jacques Bughin, James Manyika, 07 September 2018

As artificial intelligence technologies become more effective and are rolled out across economies, it is important to assess how their diffusion will affect different economic stakeholders. This column argues that an AI divide may open up on three levels: individuals (workers), companies, and countries. Unless the transition to the new economics of the future is managed effectively, these divides may create a backlash against the adoption of AI technologies, despite their significant potential long-term benefits.

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