Economic freedom and the impact of technology on productivity

A well-developed body of literature has detected positive effects of technology investments on economic growth. We contribute to this literature by studying the joint effects of technology and economic freedom on economic growth. Using two different time points. 1990 and2000. and a sample of over 100 countries. we find that economic freedom enhances the effect of technology on economic growth. In fact, we find that the standalone effect of freedom is not as large as its interactive effect with technology

Competition and Economic Growth: an Empirical Analysis for a Panel of 20 OECD Countries

This paper aims at analyzing, from an empirical point of view, the relationship between product market competition and economic growth, using the data on multi-factor productivity for a panel of 20 OECD countries over a period 1995-2005, and considering the role of the distance from the technological frontier in the growth process. Section A examines the impact of economic freedom and of the distance to frontier on the level and on the growth rate of multi-factor productivity. The analysis distinguishes between the indicators of business freedom and trade freedom, as proxies for the competitive pressures coming from domestic market and from foreign market. Then, trade liberalizations are more beneficial for the countries far from the frontier, because they can exploit the opportunities given by international trade also in order to adopt the existing technologies developed by the advanced economies. On the other hand, business liberalizations are more advantageous for the countries close to the frontier, because the elimination of regulatory barriers increases the possibility of entry in the market and then rises the potential competition to the incumbent firms. Section B studies the effect of product market regulation, employment protection legislation and of the distance to frontier on the level and on the growth rate of multi-factor productivity. Product market liberalization as well as labour market deregulation determine an increase of total factor productivity: moreover, the interaction of market rigidities with the distance to the frontier mostly displays an innovationenhancing effect, since the positive effect of market liberalizations on TFP is higher for the countries close to the frontier, where the existing technology level would reinforce the incentive for innovation.multi-factor productivity; economic freedom; product market regulation; employment protection legislation; distance to frontier

On the Formation and Structure of International Exchanges

We investigate the formation and structure of 248 financial exchanges throughout the world. First, we empirically analyze the determinants of exchange formation as well as the impact of exchange formation on the domestic country's economy. Second, conditional on formation, we use a probit model to relate the choice of trading mechanism to the characteristics of the economic environment in which the exchange exists. We find that the main determinants of exchange formation in a country are the degree of economic freedom, the growth of the economy, the availability of technology, and the legal system. In addition, we find that the impact of exchange formation on the macro economy is limited to a reduction in the growth of the monetary aggregates with no significant impact on productivity. Lastly, our results show that the choice of trading mechanism depends on the country's economic development, the degree of competition, and the extent of economic freedom

Productivity Gap between the “New” and “Old” Europe and Role of Institutions

The present study examines how policy makers should consider the quality of institutional framework to reduce the productivity gap and increase a country’s ability to absorb superior technologies developed elsewhere. This paper analyzes the impact of components of economic freedom, such as the size of government, regulation, and freedom to trade internationally, and world government indicators, such as political stability and absence of violence/terrorism, regulatory quality, and control of corruption on the productivity gap between the “Old” and “New” Europe countries. This is among the first studies to investigate, in a sample of former socialistic countries, the impact of institutions on a country’s ability to adopt superior technology developed elsewhere. A static panel analysis was applied on cross-sectional data from the eleven EU countries. The results strongly support the productivity convergence between the “Old” and “New” Europe countries, with a positive impact of the institutions on the productivity growth. However, the impact of the institutions fades the further the country is from the frontier

Competition and Economic Growth: an Empirical Analysis for a Panel of 20 OECD Countries

This paper aims at analyzing, from an empirical point of view, the relationship between product market competition and economic growth, using the data on multi-factor productivity for a panel of 20 OECD countries over a period 1995-2005, and considering the role of the distance from the technological frontier in the growth process. Section A examines the impact of economic freedom and of the distance to frontier on the level and on the growth rate of multi-factor productivity. The analysis distinguishes between the indicators of business freedom and trade freedom, as proxies for the competitive pressures coming from domestic market and from foreign market. Then, trade liberalizations are more beneficial for the countries far from the frontier, because they can exploit the opportunities given by international trade also in order to adopt the existing technologies developed by the advanced economies. On the other hand, business liberalizations are more advantageous for the countries close to the frontier, because the elimination of regulatory barriers increases the possibility of entry in the market and then rises the potential competition to the incumbent firms. Section B studies the effect of product market regulation, employment protection legislation and of the distance to frontier on the level and on the growth rate of multi-factor productivity. Product market liberalization as well as labour market deregulation determine an increase of total factor productivity: moreover, the interaction of market rigidities with the distance to the frontier mostly displays an innovationenhancing effect, since the positive effect of market liberalizations on TFP is higher for the countries close to the frontier, where the existing technology level would reinforce the incentive for innovation

Competition and Economic Growth: an Empirical Analysis for a Panel of 20 OECD Countries

This paper aims at analyzing, from an empirical point of view, the relationship between product market competition and economic growth, using the data on multi-factor productivity for a panel of 20 OECD countries over a period 1995-2005, and considering the role of the distance from the technological frontier in the growth process. Section A examines the impact of economic freedom and of the distance to frontier on the level and on the growth rate of multi-factor productivity. The analysis distinguishes between the indicators of business freedom and trade freedom, as proxies for the competitive pressures coming from domestic market and from foreign market. Then, trade liberalizations are more beneficial for the countries far from the frontier, because they can exploit the opportunities given by international trade also in order to adopt the existing technologies developed by the advanced economies. On the other hand, business liberalizations are more advantageous for the countries close to the frontier, because the elimination of regulatory barriers increases the possibility of entry in the market and then rises the potential competition to the incumbent firms. Section B studies the effect of product market regulation, employment protection legislation and of the distance to frontier on the level and on the growth rate of multi-factor productivity. Product market liberalization as well as labour market deregulation determine an increase of total factor productivity: moreover, the interaction of market rigidities with the distance to the frontier mostly displays an innovationenhancing effect, since the positive effect of market liberalizations on TFP is higher for the countries close to the frontier, where the existing technology level would reinforce the incentive for innovation

Essays On Wage Inequality Using The Search Framework

The distribution of wages and jobs changed all across advanced economies the last few decades. These changes came seemingly unexpected. Economic theory tell us to look at supply and demand to understand what happened. In practice, we cannot directly observe demand and supply shifts. We also cannot easily distinguish the economic forces behind these distributional changes from other concurrent phenomena. These fundamental problems permeate all studies of changes in the wage and occupational distributions. This dissertation applies two approaches to overcome these challenges. In the first chapter (with Tzuo-Hann Law), we take an assortative matching model with on-the-job search and use it understand what forces drove up wage inequality in Germany between the 1990s and 2000s. The model conceives of a worker\u27s ability and a firm\u27s productivity as one-dimensional, rankable indices, which we non-parametrically identify. With these productivity ranks, we identify production technology. The model fits wages almost as well as statistical decompositions that use more degrees of freedom. This model fit gives us confidence to make inference with the model. We find that changes in production technology and the equilibrium sorting patterns it induces account for the rise in wage dispersion. Search frictions had little impact on its rise over time. The approach in the first chapter works well to account for rising wage inequality. However, it misses out on another important change - the decline in traditionally middle-wage jobs or job polarization. In the second chapter, I present a multidimensional skills search model which accounts for changes in occupational wages, occupational employment shares, and the wage distribution at large. In contrast to the first chapter, this model takes a parametric approach but still reproduces numerous aspects of US cross sectional data observed from 1979 to 2010. The model indicates industry trends and technological progress account for the majority of these changes. Information and communications technology spurred demand for jobs requiring interpersonal and social skills in the 1990s. This development appears farther reaching than the automation of jobs concentrated in the manufacturing and construction sectors

Robots and us: towards an economics of the ‘Good Life’

(Expected) adverse effects of the ‘ICT Revolution’ on work and opportunities for individuals to use and develop their capacities give a new impetus to the debate on the societal implications of technology and raise questions regarding the ‘responsibility’ of research and innovation (RRI) and the possibility of achieving ‘inclusive and sustainable society’. However, missing in this debate is an examination of a possible conflict between the quest for ‘inclusive and sustainable society’ and conventional economic principles guiding capital allocation (including the funding of research and innovation). We propose that such conflict can be resolved by re-examining the nature and purpose of capital, and by recognising mainstream economics’ utilitarian foundations as an unduly restrictive subset of a wider Aristotelian understanding of choice

An Investigation of Firm-Level R&D Capabilities in East Asia

This paper uses a survey of 1,826 firms distributed over ten East Asian metropolitan areas – Jakarta, Kuala Lumpur, Manila, Seoul, and five Chinese cities – to investigate the sources of firm-level R&D capabilities. The analysis identifies the impact of 23 survey variables, classified by openness, human capital, R&D network, and institutional quality, on the efficiency of firm R&D operations and on overall firm performance. These firmlevel results are used to construct composite measures R&D capabilities for each of the 10 metropolitan economies. Using the firm samples, returns to R&D are also estimated for each of the metropolitan areas. Where cross economy comparisons are possible, as they are for Seoul and the five Chinese cities, we find a strong association between overall R&D productivity in these city economies and the composite measures of citywide R&D capabilities. In particular, high composite measures in Seoul and Shanghai are associated with high returns to R&D in those cities. The large productivitywage gaps in the Chinese cities appear to be attracting large and visible investment in R&D operations. Whether R&D wages rise to narrow this gap or investment and technology flows continue to sustain the gap will substantially affect the pattern of R&D operations within the Asian region.http://deepblue.lib.umich.edu/bitstream/2027.42/39969/3/wp583.pd

Intensity of technology use and per capita real GDP across some African countries

African countries may have fared poorly compared to some countries in other regions, but relative to their own performance history some African countries have done quite well over the past eight years. In particular 2004 and 2005 were especially good years. How can such performance be made to stick and even expand? The answer to that question requires better understanding of the source of good performance. This paper proceeds on the assumption that technology was, at least partially, responsible. The result shows that a feeble technology undercuts per capita real GDP across African countries. However, the impacts of new technologies, measured by the intensities of internet and cell phone use are very strong. The policy implication of the findings speaks to the need for investment in new technologies for which productivity is high and the adoption and diffusion costs seem low. Further research can clarify the findings and policy by expanding and improving the data coverage, and examining effects on income of different kinds of technologies