Endogenous recessions: The creative destruction effect of final product novelty

In this paper we build a basic macroeconomic model aimed to grasp some aspects of the inner functioning of macroeconomic fluctuations. We highlight a mechanism through which the appearance of a product innovation results in an eventual reduction of the aggregate economic activity. When a new product appears, demand moves towards this more attractive product. The ‘creative destruction’ effect in this context is represented by the resources lost when firms producing old varieties exit the market due to the shortage of demand. Because firms producing a given product receive on average the same amount of demand, exits happen to be highly synchronized. We use this fact to explain the fluctuation asymmetries observed in real data. We test the ability of the model to meet features of real data against the United States' GDP in the 1950–1992 period.     

Innovation And Job Creation In A Smallopen Economy-Evidence From Norwegian Manufacturing Plants 1982–92

It is often claimed that the opportunities to create new manufacturing jobs in open, high-cost economies such as Norway, are concentrated in activities which are technologically advanced and knowledge intensive. This paper examines the relationship between job creation and innovation, as measured by R&D investments, in Norwegian manufacturing. We compare job creation in plants belonging to R&D firms to job creation in plants belonging to firms without R&D. We also compare job creation in plants belonging to high and low tech industries. Our data set covers more than 80 percent of manufacturing employment in Norway over the period 1982–92. The paper challenges the optimistic view about job creation in R&D intensive firms and high-tech industries. Some main findings are: (i) Net job creation is not higher in high-tech industries. (ii) There is no clear-cut positive relationship between net job creation and the R&D-intensity of the firm. (iii) There is less net job creation and less job-security in R&D-intensitefirms in the late 1980s and early 1990s.     

On Clustering in the Location of R&D: Statics and Dynamics

Empirical analyses of research and development find strong evidence that these activities tend to cluster geographically. Clusters are thought to emerge from the presence of localized positive externalities. This paper presents a model of this clustering behaviour. We find that phase changes in clustering exist both as the strength of local externalities changes and as the degree of heterogeneity among firms changes. The dynamics of the system are examined as it responds to shocks to the size of the market for R&D output, and the length scale of the spatially dependent externalities. Dynamic responses take place in two distinct stages: a rapid response to the change in market systems which takes place throughout the space, with litlle regard to externality effects; followed by a slow re-agglomeration process as producers change their spatial decisions to lower the costs of the new production level.     

Female labour force participation in an era of organizational and technological change

Abstract The supply of skilled female labour increased significantly at the beginning of the twentieth century as women assumed positions in the newly created clerical workforce. Evidence suggests that despite this increase in labour supply, the wage paid to female clerical workers increased over the period and that the ratio of female clerical wages to male manufacturing wages was roughly constant. These labour market facts can be accounted for in a dynamic general equilibrium model in which an exogenous increase in human capital induces an increase in demand for skilled clerical workers. While induced technological change that favours skilled workers may account for the observed increase in female real wages, explaining the stagnate relative weekly wages paid to female clerical workers requires a framework that includes organizational change.     

Properties of knowledge base and firm survival: Evidence from a sample of French manufacturing firms

The paper analyzes the effects of the properties of firms' knowledge base on the survival likelihood of firms. Drawing upon the analysis of the patterns of co-occurrence of technological classes in patent applications, we derive the coherence, variety and cognitive distance indexes, accounting respectively for technological complementarity, differentiation and dissimilarity in the firms' patent portfolios. The results of our analysis are in line with the previous literature, showing that innovation enhances the survival likelihood of firms. In addition, we show that the search strategies at work in the development of firms' knowledge base matter in reducing the likelihood of a failure event. Knowledge coherence and variety appear to be positively related to firms' survival, while cognitive distance exerts a negative effect. We conclude that firms able to exploit the accumulated technological competences have more chances to be successful in competing durably in the market arena, and derive some policy implications concerning the role of public intervention in the orientation of search efforts in local contexts.     

Earnings inequality and the business cycle

Economists have long viewed recessions as contributing to increasing inequality. However, this conclusion is largely based on data from a period in which inequality was increasing over time. This paper examines the connection between long-run trends and cyclical variation in earnings inequality. We develop a model in which cyclical and trend inequality are related, and find that in our model, recessions tend to amplify long-run trends, i.e. they involve more rapidly increasing inequality when long-run inequality is increasing, and more rapidly decreasing inequality when long-run inequality is decreasing. In support of this prediction, we present evidence that during the first half of the 20th century, when earnings inequality was generally declining, earnings disparities indeed appeared to fall more rapidly in downturns, at least among workers at the top of the earnings distribution.     

International Knowledge Diffusion and Home‐bias Effect: Do USPTO and EPO Patent Citations Tell the Same Story?*

This paper estimates the international diffusion of technical knowledge using patent citations. We control for self‐citations and for procedural differences between patent offices using equivalent patents. We find that (1) there are clear biases in patent examination processes that generate citations in the two offices; (2) at the EPO there is a strong localization effect at the country level, and the size is comparable to that found at the USPTO; (3) technological fields have different properties of diffusion in the two patent offices that do not depend on a patent office bias; (4) using EPO data, the US is not the leading country in terms of citations made and received, as occurs at the USPTO.     

Unemployment and indeterminacy

Using an efficiency-wage model, we examine the relationship between indeterminacy and unemployment insurance. It is shown that the less unemployment insurance is, the more likely equilibrium is to be indeterminate. Equilibrium can be indeterminate even without externalities or increasing returns, which makes a sharp contrast to the recent literature on indeterminacy. Our result is based on the fact that the no-shirking condition with marginal utility of wealth kept constant is downward sloping when income insurance is not perfect.     

Large-scale mortality shocks and the Great Irish Famine 1845–1852

This paper considers the consequences of a large scale mortality shock arising from a famine or epidemic for long run economic and demographic development. The Great Irish Famine of 1845–1852 is taken as a case-study and is incorporated as an exogenous mortality shock into the type of long-run unified growth theory pioneered by Galor and Weil (1999, 2000), and modelled by Lagerlöf (2003a,b) among others. Through calibration, the impact of such a mortality shock occurring on the cusp of a country's transition from a Malthusian to a Modern Growth regime is then depicted.     

Cooperation In R&D With Spillovers And Delegation Of Sales ∗

Cooperation in several phases of the innovation process is viewed by antitrust authorities with suspicion. They face the dilemma between providing the right incentives for the appro-priability of returns to R&D and the risks of diminishing product market competition. The current legislation in the European Union and the United States gives special treatment to cooperation in R&D and the joint exploitation of results (extended cooperation).

We study several collusive regimes for a class of examples in which vertical relations are explicitly introduced. Regarding antitrust policy implications we fmd that: a) there is an ana-lytical justification to a ‘rule of reason’ treatment for extended cooperation in research joint ventures and, b) individual exemptions, though restrictive of competition, might be welfare improving.     

Selling patent rights and the incentive to innovate

We show that an outside innovator has a higher incentive to innovate than an incumbent innovator, by auctioning off his patent rights exclusively to an incumbent firm. For significant innovations this is also superior to selling licenses directly.     

Technology clubs, R&D and growth patterns: Evidence from EU manufacturing

This paper investigates the forces driving output change in a panel of EU manufacturing industries. A flexible modeling strategy is adopted that accounts for: (i) inefficient use of resources and (ii) differences in the production technology across industries. With our model we are able to identify technical, efficiency, and input growth for endogenously determined technology clubs. Technology club membership is modeled as a function of R&D intensity. This framework allows us to explore the components of output growth in each club, technology spillovers and catch-up issues across industries and countries.     

Signalling,Disclosure And The Implications Of Financial Structure For Uk Corporate R&D ∗

This paper investigates the impact of R&D disclosure and finance variables on the level of R&D expenditures. The question addressed is: what is the impact of changes in disclosure requirements on the relationship between R&D expenditure and the financing of firms? The question is motivated by the possible signalling role that elective disclosure may have had prior to changes in accounting practices to ensure R&D disclosure.     

A model with endogenously determined cycles, discounting and growth

Summary. This article reexamines the role of consumption in growth and emphasises the external effects of aggregate consumption, viewed as consumption standards, as an additional impediment in the growth process. These external effects raise the productivity of the individuals and are positively related to their valuation of the future. Conditions are established under which this results in a marginal value of wealth that is an increasing function of consumption. This brings new types of multiple steady states, local indeterminacies and cyclical motions. Imposing extra homogeneity restrictions, balanced growth solutions with endogenous impatience emerge. The possibility of multiple convergent paths is univocally related to endogenous discount effects. A comparison with a benchmark planning economy indicates an excessive value for the rate of time preference and emphasises its insufficient adaptation to future utility in a stationary setting. Discrepancies along the transition path that rest on endogenous impatience versus fixed discount appear in a non-stationary environment when the competitive balanced growth solution is indeterminate. Received: May 5, 1996; revised version: May 19, 1997     

Countercyclical pricing: A consumer heterogeneity explanation

We show that a seasonal good could be priced countercyclically due to the heterogeneous seasonal shifts in consumer valuations. We provide empirical support for our explanation based on two product categories (canned soup and tuna) studied in the literature.