Productivity and Innovation

Matthias van den Heuvel, David Popp, 30 July 2022

Large investments in low-carbon technologies are needed to limit global warming. This column uses data on US start-ups over the past 20 years to analyse how venture capital in clean technologies can address the funding gap. It argues that unsuccessful nationwide US climate policy has dampened demand for clean energy technologies in the past. Moving forward, governments need to implement persistent demand-side policies, such as a carbon tax, to improve the expected performance of early-stage investors in clean energy, before using targeted public investments to fund the cleantech start-ups with limited potential for outsized returns. 

Ethan Ilzetzki, 20 July 2022

There are significant regional disparities in productivity levels across the UK. The June 2022 CfM survey asked the members of its UK panel to evaluate the reasons for these disparities and policies that might close the gaps. A majority of the panel believe that the productivity differences are attributable to either agglomeration effects or sorting, self-reinforcing phenomena that lead some regions to become productivity powerhouses and others to fall behind, while just under a third think that the differences are due to fundamental factors such as education, local infrastructure, or poor transportation links across regions. The productivity gaps should be addressed with a combination of public investments, incentives for private investment, and investments in skills and education. 

Leonardo Ridolfi, Carla Salvo, Jacob Weisdorf, 17 July 2022

Fears about the effects of mechanisation on societies are not new; technology has always generated cultural anxiety throughout history. This column considers one of the most significant waves of mechanisation in history – the rise and spread of steam power in 19th century France – to examine the influence of mechanisation on labour outcomes. Rather than cutting jobs and wages, the authors find that that steam-adopting industries ended up employing up to 94% more workers than their non-steam-adopting counterparts and paid wages that were up to 5% higher on average.

Carsten Fink, Reinhilde Veugelers, 15 July 2022

The Covid crisis inspired extraordinary innovation. Carsten Fink and Reinhilde Veugelers are two of the editors of a new ebook from CEPR called Resilience and Ingenuity that examines how countries, organisations and industries were able to innovate. Tim Phillips asks them what worked, what didn’t, and whether we can keep up the pace of new ideas. 

Walker Hanlon, Stephan Heblich, Ferdinando Monte, Martin B. Schmitz, 15 July 2022

It seems obvious that lowering the cost of communication among innovators would facilitate scientific and technological progress. Yet, few studies examine this relationship. This column explores the introduction of the first modern postal system in Britain in 1840 and its effect on the number of citations between pairs of scientists and on patenting. The gradient with which citations declined with distance-based postage costs fell and patenting increased in locations that experienced more significant improvements in letter market access due to the reform.

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