Diego Comin, 04 April 2018

Europe currently faces multiple challenges on economic, demographic, and environmental fronts. All of these can be addressed by innovations in technology and process. This video discusses some of the outcomes of the EU-FRAME mid-term conference, outlining ways in which innovation policy can be designed so as to best serve welfare and productivity across all actors. This conference took place in March 2018 at ZEW, Mannheim.

CEPR is a partner of the FRAME Project, which is coordinated by ZEW. The CEPR team is led by Diego Comin, a Research Fellow in its Macroeconomics and Growth Programme. The FRAME project has received funding from the European Union's Horizon 2020 Research and Innovation Programme under the grant agreement No #727073.

Philippe Aghion, 27 March 2018

Many economists argue that fixing inequality should not come at the expense of innovation. Philippe Aghion discusses the role innovation has to play in fostering growth and social mobility. This video was recorded at the RES annual conference in Spring 2015.

Atsushi Nakajima, 27 March 2018

As the global economy continues to recover, trade frictions between advanced and emerging economies have started to appear. This column considers how Japan can continue its recent trend of economic expansion by addressing domestic growth opportunities while remaining resilient to international trade challenges. Both technological innovation and new business models are key to achieving this.

Stephen Cecchetti, Kim Schoenholtz, 22 February 2018

Investment is shifting from tangible physical assets to intangible goods like software, data, and R&D. This column analyses the impact of this shift on the structure of firm financing. The financial system’s shift from public to private equity is, on the whole, an encouraging reflection of its response to the changing needs of the economy.

Alessandro Iaria, Carlo Schwarz, Fabian Waldinger, 26 January 2018

Access to existing knowledge fuels basic scientific progress and is key to the development of new technologies. This column studies how the decline in scientific cooperation that occurred during and after WWI affected science and innovation. The interruption of international knowledge flows led to stark declines in both the volume and quality of scientific production. This points to the merits of opening up access to scientific journals and of discerning what constitutes frontier research.

Ravi Kanbur, 08 January 2018

Technological innovation is broadly accepted as a driving force behind diverging wage trends in the last three decades. If this is set to continue, policymakers must choose how to respond to the ensuing income inequality. This column assesses two established policy response ideas – state-sponsored formal education, and tax and transfer mechanisms – and postulates a third, namely, that the pace and distributional effects of technological change should themselves be policy goals. A policy intervention that would make innovation more labour intensive would be the most powerful response of all.

Michel Serafinelli, Guido Tabellini, 06 January 2018

Innovation is often concentrated in certain geographic areas, or ‘creative clusters’. This column uses novel data on famous births to explore the dynamics of creativity in European cities between the 11th and 19th centuries. The results show that creativity tends to precede economic prosperity, and that city institutions that protect personal and economic freedoms are conducive to radical innovation in a variety of domains.

Alex Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova, John Van Reenen, 24 December 2017

Relatively little is known about the factors that induce people to become inventors. Using data on the lives of over one million inventors in the US, this column sheds light on what policies can be most effective in increasing innovation. In particular, it shows that increasing exposure to innovation among women, minorities, and children from low-income families may have greater potential to spark innovation and growth than traditional approaches such as reducing tax rates.

Philippe Aghion, Ufuk Akcigit, Ari Hyytinen, Otto Toivanen, 23 December 2017

Innovation is a crucial element of modern societies, but who becomes an inventor? This column shows that parental income affects the probability of someone becoming an inventor, but that this impact is greatly diminished once parents’ socioeconomic status, parents’ education, and the individual's IQ are controlled for. Overall, the results suggest a prominent role for parental education and for IQ in explaining an individual’s probability of inventing.

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.

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.    

Christian Helmers, Henry Overman, 25 November 2017

Highly localised research infrastructure investment, such as in the Large Hadron Collider, often leads to major scientific breakthroughs, but there is little evidence on the longer-term and wider geographical impacts on scientific output. This column uses the example of the UK’s Diamond Light Source to study the impact of large facilities on where scientific research is conducted. Not only do such investments substantially increase directly related research in the local area, they also create spillovers on unrelated research through knowledge sharing.

Erika Färnstrand Damsgaard, Per Hjertstrand, Pehr-Johan Norbäck, Lars Persson, Helder Vasconcelos, 23 November 2017

Most developed economies provide significant subsidies to small businesses to encourage innovation. This column argues that while subsidies to reduce entry costs may increase entrepreneurial entry, they can also lead to a reduction in the likelihood of ‘breakthrough’ inventions. Entry costs, which are incurred when an innovation project is successful, prompt small firms and entrepreneurs to pursue high-risk, high-reward innovations.

Saul Lach, Zvika Neeman, Mark Schankerman, 03 November 2017

Understanding how the design of policy to support R&D influences its effectiveness, and how loan programmes should be optimally designed to maximise welfare, is critical to formulating effective, cost-efficient policies. This column uses mechanism design to analyse the optimal structure of R&D loan programmes. The results suggest that optimal policies should ‘target the middle’, as low-risk projects will be funded by the market and high-risk projects are not likely to generate sufficient social payoff to justify support. Moreover, the optimal policy is likely to differ across technology areas, and between industrialised and emerging economies.

Monika Schnitzer, Martin Watzinger, 31 October 2017

Conventional wisdom holds that venture capital-financed start-up companies generate positive spillovers for other businesses, but these spillovers are hard to measure accurately. This column uses a broader analysis of patent spillovers than previous studies to argue that venture capital-financed start-up companies help established companies innovate, and play a significant role in the commercialisation of new technologies. This suggests that subsidies for venture capital investment should be at least as large as current R&D subsidies.

Leonardo Iacovone, Mariana Pereira-López, Marc Schiffbauer, 30 October 2017

In spite of its potential, the use of digital technology is still basic in most developing countries. This column presents evidence that firms in Mexico facing higher external competition have used IT more intensively and efficiently. External competition has encouraged them to make the necessary complementary investments in innovation and organisational changes.

Mark Schankerman, Florian Schuett, 27 October 2017

Critics of the patent system argue that ineffective patent office screening is posing an impediment to innovation. This column develops a model to examine the effect of examination, fees, and court litigation on patent quality. Results show that frontloading fees (i.e. higher fees for application versus approval), capping litigation costs, and intensifying patent office examination all lead to increases in social welfare. Simulations calibrated with existing data suggest that about 65-85% of granted patents are invalid.

Eric Verhoogen, 18 October 2017

Klaus Adam, Henning Weber, 26 September 2017

The productivity of many firms evolves over time, which impacts the optimal inflation rate, that is, the rate of price increase with the least distortionary effect on relative goods prices. This column presents estimates for the US that suggest that, due to firm-level productivity changes, the optimal inflation rate has dropped from somewhat over 2% in the mid-1980s to a current level of roughly 1%.

Nicholas Bloom, Chad Jones, John Van Reenen, Michael Webb, 20 September 2017

The rate of productivity growth in advanced economies has been falling. Optimists hope for a fourth industrial revolution, while pessimists lament that most potential productivity growth has already occurred. This column argues that data on the research effort across all industries shows the costs of extracting ideas have increased sharply over time. This suggests that unless research inputs are continuously raised, economic growth will continue to slow in advanced nations.



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