Are ideas getting harder to find?

In many growth models, economic growth arises from people creating ideas, and the long-run growth rate is the product of two terms: the effective number of researchers and their research productivity. We present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore’s Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 18 times larger than the number required in the early 1970s. Across a broad range of case studies at various levels of (dis)aggregation, we find that ideas—and in particular the exponential growth they imply — are getting harder and harder to find. Exponential growth results from the large increases in research effort that offset its declining productivit

Are ideas getting harder to find?

Long-run growth in many models is the product of two terms: the effective number of researchers and their research productivity. We present evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore's Law. The number of researchers required today to achieve the famous doubling of computer chip density is more than 18 times larger than the number required in the early 1970s. More generally, everywhere we look we find that ideas, and the exponential growth they imply, are getting harder to find

Market structure, innovation and union bargaining: An empirical investigation into the creation and capture of economic rents

A panel of firms in the 1970s and 1980s and a cross section of establishments in 1984 is used to investigate the impact of market structure and technological innovation on profit margins, employment and wages. The primary findings are as follows: Profit margins are pro-cyclical across all product groups, they increase with the firm's market share and degree of industrial concentration in the firm's principal operating industry. Innovations are associated with greater profitability for up to six years. This is only partly due to the innovation itself; it is mainly because innovative firms have permanent differences from non-innovators and are better at protecting their profit margins during recessions. Technological change creates jobs at the micro-level and particularly in companies with strong unions. The hypothesis that unions bargain over employment is rejected. Wages tend to increase with innovations in the union sector. The firm panel shows that this 'technological differential' persists into the medium run and is stronger in the late 1970s than the early 1980s. The establishment cross section shows that the result is robust to controls for skill and workplace characteristics and does not seem to be a compensating differential. For all these reasons it is concluded that the wage differential is more likely to arise from bargaining than from purely competitive reasons. The wage mark-up from innovation appears to be greater for skilled workers and declines at higher levels of union power

Management Practices, Workforce Selection, and Productivity

We study the relationship among productivity, management practices, and employee ability using German data combining management practices surveys with employees’ longitudinal earnings records. Including human capital reduces the association between productivity and management practices by 30% – 50%. Only a small fraction is accounted for by the higher human capital of the average employee at better-managed firms. A larger share is attributable to the human capital of the highest-paid workers, that is, the managers. A similar share is mediated through the pay premiums offered by better-managed firms. We find that better-managed firms recruit and retain workers with higher average human capital

The long-term effect of digital innovation on bank performance: An empirical study of SWIFT adoption in financial services

We examine the impact on bank performance of the adoption of SWIFT, a network-based technological infrastructure and set of standards for worldwide interbank telecommunication. We construct a new longitudinal dataset of 6848 banks in 29 countries in Europe and the Americas with the full history of adoption since SWIFT's initial operations in 1977. Our results suggest that the adoption of SWIFT (i) has large effects on profitability in the long-term; (ii) these profitability effects are greater for small than for large banks; and (iii) exhibits significant network effects on performance. We use an in-depth field study to better understand the mechanisms underlying the effects on profitability

Concentrating on the Fall of the Labor Share

The recent fall of labor's share of GDP in numerous countries is well-documented, but its causes are poorly understood. We sketch a "superstar firm" model where industries are increasingly characterized by "winner take most" competition, leading a small number of highly profitable (and low labor share) firms to command growing market share. Building on Autor et al. (2017), we evaluate and confirm two core claims of the superstar firm hypothesis: the concentration of sales among firms within industries has risen across much of the private sector; and industries with larger increases in concentration exhibit a larger decline in labor's share