Philippe Aghion, Helene Maghin, André Sapir, 25 June 2020

The COVID-19 pandemic has shed light on the structural dichotomy between the models of capitalism operating in Europe and the US; the former offers better protection for its citizens while the latter shows greater economic dynamism. This column argues that for all the harm COVID-19 has caused, the crisis has also provided an opening to rethink the versions of capitalism practised on both sides of the Atlantic. Some degree of convergence towards a better model is desirable, the authors suggest, and perhaps even possible.

Sylvain Leduc, Zheng Liu, 14 June 2020

The COVID-19 pandemic has raised concerns about the future of work. The pandemic may become recurrent and necessitate repeated adoptions of social distancing measures, creating substantial uncertainty about worker productivity. This column presents a theoretical framework suggesting that such job uncertainty reduces aggregate demand, and dampens business investment in general. However, automation may provide one way for businesses to cope with the uncertainty about worker productivity. It appears that pandemic-induced job uncertainty could stimulate automation investment, despite declines in aggregate demand.

Pierre-Yves Geoffard, 04 June 2020

The health costs of the Covid-19 pandemic are considerable, and the economic and social costs of lockdown policies are even larger. This column calls for an innovative mechanism to foster the development of a vaccine against Covid-19. Governments would commit now to buy back any patent obtained by a private firm which would discover an effective vaccine, at a price of €60 billion, and would grant the right to produce the vaccine to any firm able to do so. This mechanism would provide strong incentives to innovate, while protecting firms from the political risk of expropriation.

David Argente, Salome Baslandze, Douglas Hanley, Sara Moreira, 28 May 2020

Patents are at the heart of policies designed to incentivise innovation and productivity growth. In recent years however, while patent activity has skyrocketed, innovation and productivity growth have not. This column collects data on product innovations and links those to their respective patent. While patent filings are found to be followed by product innovations overall, this relationship is much stronger for firms with lower market share.

Sabrina Howell, Josh Lerner, Ramana Nanda, Richard Townsend, 14 May 2020

Governments worldwide have taken steps to bolster their venture capital sectors in response to the COVID-19 crisis. This column questions whether venture-backed innovation is particularly vulnerable to economic downturns, and finds that early-stage venture investment falls sharply during recessions. The quantity and quality of venture-backed innovation declines particularly for early-stage firms, underscoring the concerns that motivate such policy initiatives. Still, questions remain about the optimal design and public return of these expenditures.

Gaétan de Rassenfosse, Dominique Foray, George Abi Younes, Charles Ayoubi, Omar Ballester, Gabriele Cristelli, Patrick Gaulé, Gabriele Pellegrino, Matthias van den Heuvel, Elizabeth Webster, Ling Zhou, 06 May 2020

The COVID-19 crisis reflects a failure of the global health system. It also reflects well-known failures of the global science, technology, and innovation ecosystem, including systematic underinvestment in vaccine research. At the same time, the crisis reveals the extraordinary resilience of this ecosystem. This column argues that innovation is the only way out of the pandemic, and that formidable creative approaches and entrepreneurial forces are at play. Research in the economics of innovation helps in understanding some root causes of the present situation and sheds light on possible policy responses. 

Liudmila Alekseeva, José Azar, Mireia Gine, Sampsa Samila, Bledi Taska, 03 May 2020

Artificial intelligence will transform job tasks and occupations. This column uses data from US online job postings during 2010–2019 to show how absolute and relative demand for AI-related skills has grown across all industry sectors and occupation groups. Jobs requiring AI skills command, on average, an 11% wage premium compared to similar jobs that do not require AI knowledge. However, AI is at least as much a managerial challenge as it is a technological challenge. Real productivity gains will come only when there are managers who can use AI to create and capture value.

Keiko Ito, Kenta Ikeuchi, Chiara Criscuolo, Jonathan Timmis, Antonin Bergeaud, 23 April 2020

Interconnectedness and relative position in global production networks is an important factor for modern economies. In recent years, Japanese firms have lost their relative influence within the regional value chain. This column analyses the relationship between measures of network centrality and firm innovation output. It finds that having access to a greater breadth of customers is positively related to innovative activities, measured by patent applications. The results suggest an important role of knowledge spillovers from foreign markets.

Johannes Ehrentraud, Denise Garcia, 19 April 2020

Technological innovations in financial services are affecting every sector of the financial industry and generating a surge of new applications. This column takes stock of the policy responses to fintech developments in approximately 30 jurisdictions worldwide and proposes a novel conceptual framework – the ‘fintech tree’ – that distinguishes three categories: fintech activities, enabling technologies, and policy enablers. Designing a policy framework for fintech will require finding a balance that maximises its benefits while minimising potential risks to the financial system.

Nicola Pierri, Yannick Timmer, 18 April 2020

Technology adoption in lending can enhance financial stability through the production of more resilient loans. Motivated by the recent surge of FinTech lending, this column analyses the implications of lenders' information technology adoption for financial stability. Banks that adopted IT more intensely before the Global Crisis were significantly more resilient when the shock hit. These banks had significantly fewer non-performing loans, and issued more loans during the crisis itself. Loan-level analysis indicates that high IT adoption banks issued mortgages with better performances and did not offload low-quality loans.

Stefano Bolatto, Alireza Naghavi, Gianmarco Ottaviano, Katja Zajc Kejžar, 16 April 2020

Contracting institutions have proved to be pivotal for supply chain organisation, and empirical evidence has shown that firms rely on outsourcing to deal with hold-up inefficiencies induced by contract incompleteness. For intangible assets, vertical integration is one strategy to prevent knowledge dissipation. This column presents new research that illustrates how firms organise their value chain and their ‘knowledge’ under imperfect protection of intellectual property rights. The results suggest that the quality of institutions protecting tangible and intangible assets may have opposite effects on organisational choices along the supply chain.

Jeffrey Clemens, Parker Rogers, 10 March 2020

Why has medical innovation brought cost-increasing enhancements to quality, rather than cost-reducing advances in productivity? The column uses a new dataset drawn from patents for prosthetic devices to show that the design of incentives for innovators can have substantial effects on these margins. Fixed-price procurement arrangements induce greater effort to reduce production costs than cost-plus procurement arrangements. Procurement models may therefore inadvertently lead to 'missing innovations'.

Dany Bahar, Raj Choudhury, Hillel Rapoport, 28 February 2020

There is considerable historical and contemporary evidence of the linkages between skilled migration and innovation, suggesting that one of the most important engines of economic growth stands to be strongly negatively affected by the growing backlash against migration around the world. Based on a 95-country sample spanning several decades, this column shows that migrant inventors play an important role in shaping the patent production of their destination countries. Arguably, these dynamics – driven by migrant inventors – can also affect broader economic outcomes, given the secondary effects of patenting and innovation on productivity and firm performance.

William Kerr, 31 January 2020

Why are cities so keen to create their own technology clusters, and why is it so difficult? Bill Kerr of Harvard Business School tells Tim Phillips what economists know (and don't know) about where tech clusters come from

Enrico Moretti, Claudia Steinwender, John Van Reenen, 18 December 2019

Defence R&D is a major component of government-sponsored R&D in many developed economies, and the effect of defence R&D expenditures on private sector innovation and economic growth has been a hotly debated topic for many years. This column presents a systematic analysis across all OECD countries which suggests that a 10% increase in defence R&D results in a 4% increase in private R&D. It also reveals evidence of spillovers between countries, with increases in government-funded R&D in one country appearing to increase private R&D spending in the same industry in other countries.

Henrique Basso, Juan F Jimeno, 29 November 2019

Advanced economies will face large demographic and radical technological change in the next decades. This column shows how demographics and endogenous technological changes, which encompass both innovation and automation, can interact to limit the future prospects for growth and alter the factor income distribution. Due to a trade-off between innovation and automation, lower fertility and population ageing are likely to generate more automation, but also lead to a reduction in GDP per capita growth and the labour income share.

Hans Gersbach, Ulrich Schetter, Samuel Schmassmann, 28 November 2019

We do not know how much basic research is desirable from a national and global perspective, and in which industries. This column describes the insights from a new multi-country, multi-industry framework with international trade. It shows that global investments in basic research are too low, too heavily concentrated in industrialised countries, and not sufficiently targeted towards high-tech industries.

Philippe Aghion, Sergei Guriev, Kangchul Jo, 07 November 2019

Moving from low- to high-income status implies that countries escape the middle-income trap. This implies institutional reform to create innovation-based growth. The column uses firm-level data to show how the Korean government's chaebol reforms in the late 1990s transformed the economy from an investment-based to an innovation-based model. There are lessons here for China.

Alberto Galasso, Hong Luo, 30 October 2019

Higher risk perception may suppress demand for a product class and chill R&D investment, or increase the incentive to innovate risk-mitigating technologies. The column uses media coverage of accidents involving CT scanners to investigate the impact on firm innovation. Higher public risk perception increased patent applications and the rate of new product innovation, even without changes in liability or regulation.

Sotiris Blanas, Gino Gancia, Tim Lee, 10 October 2019

Since the early 1980s, technology has reduced the demand for low and medium-skill workers, the young, and women, especially in manufacturing industries. The column investigates which technologies have had the largest effect, and on which types of worker. It finds that robots and software raised the demand for high-skill workers, older workers, and men, especially in service industries. 



CEPR Policy Research