Globalization and wage polarization

In the 1980s and 1990s, the US labour market experiences a remarkable polarization along with fast technological catch-up, as Europe and Japan improve their global innovation performance. Is foreign technological convergence an important source of wage polarization? To answer this question, we build a multi-country Schumpeterian growth model with heterogeneous workers, endogenous skill formation and occupational choice. We show that convergence produces polarization through business stealing and increasing competition in global innovation races. Quantitative analysis shows that these channels can be important sources of US polarization. Moreover, the model delivers predictions on the US wealth-income ratio consistent with empirical evidence

Technology, Market Structure and the Gains from Trade

We study the gains from trade in a new model with oligopolistic competition, firm heterogeneity, and innovation. Lowering trade costs reduces markups on domestic sales but increases markups on export sales, as firms do not pass the entire reduction in trade costs onto foreign consumers. Trade liberalisation can also reduce the number of firms competing in each market, thereby increasing markups on both domestic and export sales. For the majority of exporters, however, the procompetitive effect prevails and their avera ge markups decline. The incomplete pass-though and the reduction in the number of competitors instead dominate for top-exporters – the top 0:1% of firms which end up increasing their markup. In a quantitative exercise we find that the aggregate effect of trade-induced markup changes is pro-competitive and accounts for the majority of the welfare gains from trade. Trade-induced changes in competition affect survival on domestic and export markets and firms’ decision to innovate. All exporters, and especially the top exporters, increase their market size after liberalisation which, in turn, encourages them to innovate more. Hence, top exporters contribute negatively to welfare gains by increasing their markups but positively by increasing innovation and productivity. Firms’ innovation response accounts for a small but non-negligible share of the welfare gains while the contribution of selection is U-shaped, being negative for small liberalisations and positive otherwise. A more globalised economy is therefore populated by larger, fewer and more innovative firms, each feature representing an important source of the gains from trade

Should I Stay or Should I Go? Firm Heterogeneity in the Post-crisis Period

Existing microeconomic research on exporting firms is dominated by empirical findings across time and countries based on two theories of why firms choose to export. One requires firms to be better performers before entry, the other requires there to be improvements in performance as a result of entry. In this paper, we disentangle entry to, and exit from, the overseas market for UK manufacturing firms to better understand the motivations and characteristics underlying both decisions. We explore the extent to which changes in the macroeconomic environment may influence behaviour, following a time of global financial turbulence

Regional heterogeneity and firms’ innovation: the role of regional factors in industrial R&D in India

This study makes an early attempt to estimate the magnitude and intensity of manufacturing firms’ R&D by Indian states during the period 1991‒2008 and analyses the role of regional factors on firm-level R&D activities. As there is little research on state-wise R&D performance of firms in India, this study serves an important contribution to the academic and policy realm. It has brought out the fact the total manufacturing R&D investment in India is unevenly distributed regionally with a few states accounting for disproportionate share of it. Regional heterogeneity or inter-state disparities in R&D has increased between the 1990s and the first decade of the twenty-first century. In view of this persistent regional heterogeneity in R&D, the study has developed and estimated an empirical model for a sample of 4545 Indian manufacturing firms with R&D facilities located in single state and that explicitly includes regional factors as probable factors affecting R&D. The three-step Censored Quantitle Regression results confirm that regional factors play an important role in shaping the R&D intensity of the sample of firms. This led us to some useful policy suggestions for regional governments to promote local firms’ R&D activities

Codes for "Technology, Market Structure and the New Gains from Trade", by Impullitti, Licando, Rendahl.

Codes for "Technology, Market Structure and the New Gains from Trade", by Impullitti, Licando, Rendahl

Government Spending Composition, Technical Change, and Wage Inequality

In this paper we argue that government spending played a significant role in stimulating the wave of innovation that hit the U.S. economy in the late 1970s and in the 1980s, as well as the simultaneous increase in inequality and in education attainments. Since the late 1970s U.S. policymakers began targeting commercial innovations more directly and explicitly. We focus on the shift in the composition of public demand toward high-tech goods, which, by increasing the market-size of innovative firms, functions as a de facto innovation policy tool. We build a quality-ladders non-scale growth model with heterogeneous industries and endogenous supply of skills, and show that an increase in the technological content of public spending stimulates R&D, raises the wage of skilled workers, and, at the same time, stimulates human capital accumulation. A calibrated version of the model suggests that government policy explains between 12% and 15% of the observed increase in wage inequality in the period 1976–1991. (JEL: E62, J31, O33, O41

Codes for "Technology, Market Structure and the New Gains from Trade", by Impullitti, Licando, Rendahl.

Codes for "Technology, Market Structure and the New Gains from Trade", by Impullitti, Licando, Rendahl