Browsing by Subject "O31"

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  • Schmöller, Michaela; Spitzer, Martin (2021)
    European Economic Review May ; 2021
    Published in BoF DP 21/2019 ("Endogenous TFP, business cycle persistence and the productivity slowdown in the euro area")
    This paper analyses the role of endogenous total factor productivity dynamics in explaining business cycle persistence as well as the missing (dis-)inflation and productivity puzzles in the euro area. We show by means of an estimated medium-scale DSGE model in which TFP evolves endogenously as the result of costly investment in R&D and technology adoption that the endogenous slowdown in total factor productivity can explain the depth and persistence of the output drop and the weak recovery following the double-dip recession in the euro area. Our results suggest that a decrease in R&D efficiency and innovation is key in explaining the pre-crisis euro area productivity slowdown, while as of 2008 a crises-induced drop in technology adoption constitutes the most important factor. We document a flattening of the Phillips curve relationship under the endogenous TFP mechanism, resulting from the interaction between inflation and productivity dynamics. The endogenous reaction in TFP dampens the inflation response over the business cycle and can thus help explain both the moderate fall in euro area inflation during its crises and its sluggish increase in the subsequent recovery.
  • Schmöller, Michaela; Spitzer, Martin (2019)
    Bank of Finland Research Discussion Papers 21/2019
    Published in European Central Bank Working Paper Series 2401/2020 https://www.ecb.europa.eu/pub/research/working-papers/html/index.en.html
    This paper analyses the procyclicality of euro area total factor productivity and its role in business cycle amplification by estimating a medium-scale DSGE model with endogenous productivity mechanism on euro area data. Total factor productivity evolves endogenously as a consequence of costly investment in R&D and adoption of new technologies. We find that the endogeneity of TFP induces a high degree of persistence in the euro area business cycle via a feedback mechanism between overall economic conditions and investment in productivity-enhancing technologies. As to the sources of the euro area productivity slowdown, we conclude that a decrease in the efficiency of R&D investment is among the key factors generating the pre-crisis productivity slowdown, while starting from the Great Recession an increase in liquidity demand is identified as the most important driving force. The endogenous technology mechanism further exerts a dampening effect on the inflation response over the business cycle which helps rationalizing both the negligible fall in inflation during the Great Recession and the sluggish increase of inflation in the subsequent recovery.
  • Anand, Smriti; Hasan, Iftekhar; Sharma, Priyanka; Wang, Haizhi (2017)
    Bank of Finland Research Discussion Papers 24/2017
    Available also in Research in Human resource management 57 ; 1 ; 2018 http://urn.fi/URN:NBN:fi:bof-201810292110
    Non-compete agreements (also known as Covenants Not to Compete or CNCs) are frequently used by many businesses in an attempt to maintain their competitive advantage by safeguarding their human capital and the associated business secrets. Although the choice of whether to include CNCs in employment contracts is made by firms, the real extent of their restrictiveness is determined by the state laws. In this paper, we explore the effect of state level CNC enforceability on firm productivity. We assert that an increase in state level CNC enforceability is detrimental to firm productivity, and this relationship becomes stronger as comparable job opportunities become more concentrated in a firm’s home state. On the other hand, this negative relationship is weakened as employee compensation tends to become more long-term oriented. Results based on hierarchical linear modeling analysis of 21,134 firm-year observations for 3,027 unique firms supported all three hypotheses.
  • Funke, Michael; Ruhwedel, Ralf (2003)
    BOFIT Discussion Papers 8/2003
    Published in Economics of Transition vol 13, no 1 (2005), pp. 25-50
    Utilising panel data for 14 East European transition economies, we find support for the hypothesis that a greater degree of export variety relative to the U.S. helps to explain relative per capita GDP levels.The empirical work relies upon some direct measures of product variety calculated from 5-digit OECD trade data.Although the issue is far from settled, the emerging view is that the index of relative export variety across countries correlates significantly with relative per capita income levels. Keywords: Product Variety, Transition Economies, Eastern Europe, Economic Growth, Panel Data JEL classification: C33, F43, O31, O33, O52.
  • Kerr, William R.; Nanda, Ramana (2015)
    Bank of Finland Research Discussion Papers 28/2015
    We review the recent literature on the financing of innovation, inclusive of large companies and new startups. This research strand has been very active over the past five years, generating important new findings, questioning some long-held beliefs, and creating its own puzzles. Our review outlines the growing body of work that documents a role for debt financing related to innovation. We highlight the new literature on learning and experimentation across multi-stage innovation projects and how this impacts optimal financing design. We further highlight the strong interaction between financing choices for innovation and changing external conditions, especially reduced experimentation costs.
  • Pekkala Kerr, Sari; Kerr, William; Özden, Çağlar; Parsons, Christopher (2017)
    Bank of Finland Research Discussion Papers 2/2017
    Forthcoming in Journal of Economic Perspectives
    The global distribution of talent is highly skewed and the resources available to countries to develop and utilize their best and brightest vary substantially. The migration of skilled workers across countries tilts the deck even further. Using newly available data, we first review the landscape of global talent mobility, which is both asymmetric and rising in importance. We next consider the determinants of global talent flows at the individual and firm levels and sketch some important implications. Third, we review the national gatekeepers for skilled migration and broad differences in approaches used to select migrants for admission. Looking forward, the capacity of people, firms, and countries to successfully navigate this tangled web of global talent will be critical to their success.
  • Akcigit, Ufuk; Kerr, William R. (2013)
    Bank of Finland Research Discussion Papers 28/2013
    We study how exploration versus exploitation innovations impact economic growth through a tractable endogenous growth framework that contains multiple innovation sizes, multi-product firms, and entry/exit. Firms invest in exploration R&D to acquire new product lines and exploitation R&D to improve their existing product lines. We model and show empirically that exploration R&D does not scale as strongly with firm size as exploitation R&D. The resulting framework conforms to many regularities regarding innovation and growth differences across the firm size distribution. We also incorporate patent citations into our theoretical framework. The framework generates a simple test using patent citations that indicates that entrants and small firms have relatively higher growth spillover effects. JEL Classification: O31, O33, O41, L16 Keywords: Endogenous Growth, Innovation, Exploration, Exploitation, Research and Development, Patents, Citations, Scientists, Entrepreneurs
  • Pekkala Kerr, Sari; Kerr, William; Özden, Çağlar; Parsons, Christopher (2017)
    Bank of Finland Research Discussion Papers 7/2017
    This paper reviews recent research regarding high-skilled migration. We adopt a data-driven perspective, bringing together and describing several ongoing research streams that range from the construction of global migration databases, to the legal codification of national policies regarding high-skilled migration, to the analysis of patent data regarding cross-border inventor movements. A common theme throughout this research is the importance of agglomeration economies for explaining high-skilled migration. We highlight some key recent findings and outline major gaps that we hope will be tackled in the near future.
  • Pekkala Kerr, Sari; Kerr, William R. (2016)
    Bank of Finland Research Discussion Papers 33/2016
    We examine immigrant entrepreneurship and the survival and growth of immigrant-founded businesses over time relative to native-founded companies. Our work quantities immigrant contributions to new firm creation in a wide variety of fields and using multiple definitions. While significant research effort has gone into understanding the economic impact of immigration into the United States, comprehensive data for quantifying immigrant entrepreneurship are difficult to assemble. We combine several restricted-access U.S. Census Bureau data sets to create a unique longitudinal data platform that covers 1992-2008 and many states. We describe differences in the types of businesses initially formed by immigrants and their medium-term growth patterns. We also consider the relationship of these outcomes to the immigrants’ age at arrival to the United States.
  • Pekkala Kerr, Sari; Kerr, William (2020)
    Research Policy 3 ; April
    We study immigrant entrepreneurship in 2007 and 2012 using the Survey of Business Owners. First-generation immigrants create about 25% of new firms in America, but this share exceeds 40% in some states. Conditional on basic regression controls, immigrant-owned firms tend to create fewer jobs than native-owned firms, have comparable pay levels, offer fewer benefits, and engage more in international activities. Prominent tech clusters display quite pronounced shares of immigrant entrepreneurs. Our results suggest that most of the impact of immigrant high-tech entrepreneurship for tech centers happens through the quantity dimension: Silicon Valley and similar tech hubs attract many immigrant founders.
  • Acemoglu, Daron; Akcigit, Ufuk; Bloom, Nicholas; Kerr, William (2013)
    Bank of Finland Research Discussion Papers 22/2013
    We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A key feature is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using detailed US Census micro data on firm-level output, R&D and patenting. The model provides a good t to the dynamics of firm entry and exit, output and R&D, and its implied elasticities are in the ballpark of a range of micro estimates. We find industrial policy subsidizing either the R&D or the continued operation of incumbents reduces growth and welfare. For example, a subsidy to incumbent R&D equivalent to 5% of GDP reduces welfare by about 1.5% because it deters entry of new high-type rms. On the contrary, substantial improvements (of the order of 5% improvement in welfare) are possible if the continued operation of incumbents is taxed while at the same time R&D by incumbents and new entrants is subsidized. This is because of a strong selection effect: R&D resources (skilled labor) are inefficiently used by low-type incumbent firms. Subsidies to incumbents encourage the survival and expansion of these firms at the expense of potential high-type entrants. We show that optimal policy encourages the exit of low-type firms and supports R&D by high-type incumbents and entry. JEL No. E2, L1, O31, O32 and O33 Keywords: entry, growth, industrial policy, innovation, R&D, reallocation, selection.
  • Acemoglu, Daron; Akcigit, Ufuk; Alp, Harun; Bloom, Nicholas; Kerr, William (2018)
    American Economic Review 11 ; November
    We build a model of firm-level innovation, productivity growth, and reallocation featuring endogenous entry and exit. A new and central economic force is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using US Census microdata on firm-level output, R&D, and patenting. The model provides a good fit to the dynamics of firm entry and exit, output, and R&D. Taxing the continued operation of incumbents can lead to sizable gains (of the order of 1.4 percent improvement in welfare) by encouraging exit of less productive firms and freeing up skilled labor to be used for R&D by high-type incumbents. Subsidies to the R&D of incumbents do not achieve this objective because they encourage the survival and expansion of low-type firms.
  • Hasan, Iftekhar; Hoi, Chun-Keung (Stan); Wu, Qiang; Zhang, Hao (2020)
    Journal of Corporate Finance June
    We find that social capital in U.S. counties, as captured by strength of social norms and density of social networks, is positively associated with innovation of firms headquartered in the county, as captured by patents and citations. This relation is robust in fixed-effect regressions, instrumental variable regressions with a Bartik instrument, propensity score matching regressions, and a difference-in-differences design that isolates the effects of over time variations in social capital due to corporate headquarter relocations. Strength of social norms plays a more dominant role than density of social networks in producing these empirical regularities. Cross-sectional evidence indicates the prominence of the contracting channel through which social capital relates to innovation. Additionally, we find that social capital is also positively associated with trademarks and effectiveness of corporate R&D expenditures.
  • Bozkaya, Ant; Kerr, William R. (2013)
    Bank of Finland Research Discussion Papers 30/2013
    Published in Journal of Economics and Management Strategy, Volume 23, Issue 4, 1 December 2014: 776-810
    European nations substitute between employment protection regulations and labor market expenditures (e.g., unemployment insurance benefits) for providing worker insurance. Employment regulations more directly tax firms making frequent labor adjustments than other labor market insurance mechanisms. Venture capital investors are especially sensitive to these labor adjustment costs. Nations favoring labor market expenditures as the mechanism for providing worker insurance developed stronger venture capital markets over 1990-2008, especially in high volatility sectors. In this context, policy mechanisms are more important than the overall level of worker insurance. JEL Classification: G24, J21, J65, L26, M13, O31, O32, O52. Key Words: employment protection regulations, dismissal costs, unemployment insurance benefits, private equity, venture capital, entrepreneurship.
  • Takalo, Tuomas; Tanayama, Tanja; Toivanen, Otto (2013)
    Bank of Finland Research Discussion Papers 2/2013
    Published in International Journal of Industrial Organization, Volume 31, Issue 5, September 2013, Pages 634–642
    We extend the theoretical basis of the empirical literature on the effects of R&D subsidies by providing an estimable model of strategic interaction among subsidy applicants, and public and private sector R&D financiers. Our model incorporates fixed R&D costs and a cost of external finance. We derive the optimal support rule. At the intensive (extensive) margin the costs of external funding reduce (increase) the optimal subsidy rate. We also establish necessary and sufficient conditions for the existence of additionality. It turns out that additionality at the intensive margin is less likely with large spillovers. Our results suggest that the relationship between additionality and welfare may not be straightforward. Keywords: R&D, entrepreneurial finance, R&D subsidies, innovation policy JEL classification numbers: O38, O31, L32, H25, G28
  • Takalo, Tuomas (2013)
    Bank of Finland Research Discussion Papers 1/2013
    Published in Journal of Reviews on Global Economics, Volume 1, 2012, Pages 157-167
    Economic interest in innovation policy largely arises from the fundamental importance of innovation to social welfare and from inefficiencies in innovation in a competitive market environment. As a result, a wide variety of public innovation policies are used in practice. This study reviews the economic justifications for public innovation policies and compares the existing policy tools, paying particular attention to the Finnish innovation policy environment. Key Words: Innovation policies, innovation, R&D, incentives, market failures JEL Classification: O38, O34, O31, G28, H25
  • Chen, Xi; Funke, Michael (2012)
    BOFIT Discussion Papers 13/2012
    Published in Journal of Macroeconomics, Volume 38, Part B, December 2013, Pages 465-480
    This paper accounts for China.s economic growth since 1980 in a unified endogenous growth model in which a sequencing of physical capital accumulation, human capital ac-cumulation and innovation drives the rise in China.s aggregate income. The first stage is characterized by physical capital accumulation. The second stage includes both physical and human capital accumulation, and in the final stage innovation is added to the mix. Model calibrations indicate that the growth model can generate a trajectory that accords well with the different stages of development in China. Keywords: China, economic growth, transitional dynamics JEL-Classification: D90, O31, O33, O41
  • Hasan, Iftekhar; Khalil, Fahad; Sun, Xian (2017)
    Bank of Finland Research Discussion Papers 17/2017
    We investigate the impacts of improved intellectual property rights (IPR) protection on cross-border M&A performance. Using multiple measures of IPR protection and based on generalized difference-in-differences estimates, we find that countries with better IPR protection attract significantly more hi-tech cross-border M&A activity, particularly in developing economies. Moreover, acquirers pay higher premiums for companies in countries with better IPR protection, and there is a significantly higher acquirer announcement effect associated with these hi-tech transactions.
  • Hasan, Iftekhar; Khalil, Fahad; Sun, Xian (2017)
    Quarterly Journal of Finance 3
    BoF DP 17/2017
    We investigate the impacts of improved intellectual property rights (IPR) protection on cross-border M&A performance. Using multiple measures of IPR protection and based on generalized difference-in-differences estimates, we find that countries with better IPR protection attract significantly more hi-tech cross-border M&A activity, particularly in developing economies. Moreover, acquirers pay higher premiums for companies in countries with better IPR protection, and there is a significantly higher acquirer announcement effect associated with these hi-tech transactions.
  • Acemoglu, Daron; Akcigit, Ufuk; Hanley, Douglas; Kerr, William R. (2015)
    Bank of Finland Research Discussion Papers 26/2015
    We develop a microeconomic model of endogenous growth where clean and dirty technologies compete in production and innovation–in the sense that research can be directed to either clean or dirty technologies. If dirty technologies are more advanced to start with, the potential transition to clean technology can be difficult both because clean research must climb several rungs to catch up with dirty technology and because this gap discourages research effort directed towards clean technologies. Carbon taxes and research subsidies may nonetheless encourage production and innovation in clean technologies, though the transition will typically be slow. We characterize certain general properties of the transition path from dirty to clean technology. We then estimate the model using a combination of regression analysis on the relationship between R&D and patents, and simulated method of moments using microdata on employment, production, R&D, firm growth, entry and exit from the US energy sector. The model’s quantitative implications match a range of moments not targeted in the estimation quite well. We then characterize the optimal policy path implied by the model and our estimates. Optimal policy makes heavy use of research subsidies as well as carbon taxes. We use the model to evaluate the welfare consequences of a range of alternative policies.