Quality Risk Aversion, Conjectures, and New Product Diffusion

In this paper we provide a generalization of the standard models of the diffusion of a new product. Consumers are heterogeneous and risk averse, and the firm is uncertain about the demand curve: both learn from past observations. The attitude towards risk has important effects with regard to the diffusion pattern. In our model, downward-biased signals to consumers can prevent the success of the product, even if its objective quality is high: a “lock-in” result. We show in addition that the standard logistic pattern can be derived from the model. Finally, we discuss the asymptotic behavior of the learning dynamics, with regard to the multiplicity and the stability of equilibria, and to their welfare properties.Heterogeneity, Multiple equilibria, Lock-in, Product diffusion, Risk aversion.

The job creation effect of R&D expenditures

In this study we use a unique database covering 25 manufacturing and service sectors for 16 European countries over the period 1996-2005, for a total of 2,295 observations, and apply GMM-SYS panel estimations of a demand-for-labour equation augmented with technology. We find that R&D expenditures have a job-creating effect, in accordance with the previous theoretical and empirical literature discussed in the paper. Interestingly enough, the labour-friendly nature of R&D emerges in both the flow and the stock specifications. These findings provide further justification for the European Lisbon-Barcelona targets.Technological change, corporate R&D, employment, product innovation, GMMSYS

Expectational Bottlenecks and the Emerging of New Organizational Forms

In this article we discuss the dynamics of organizational change when agents have heterogeneous initial conjectures and do learn. In this framework, conjectural equilibrium is defined as a steady state of the learning process, and all the adjustment occurs in disequilibrium. We discuss the properties of the system under different “rationality” assumptions, and using well-known learning algorithms. We prove analytically that multiplicity of equilibria, and failure of good organizational routines, cannot be ruled out: better, they are fairly probable. Stability is a crucial matter: it is shown to depend on initial conjectures. Finally, learning does not necessarily select the best.

Innovation and demand in industry dynamics.

The links between three interconnected elements of the Schumpeterian sources of economic change are explored, conceptually and empirically, in this paper: the commitment of industries to invest profits in cumulative R&D efforts; the ability of industries’ R&D to lead to successful innovations; the impact of new products and processes on high entrepreneurial profits. We consider the nature and variety of innovative efforts – distinguishing in particular between strategies of technological and cost competiveness – and we introduce the role of demand in pulling technological change and supporting profits. We develop a simultaneous three-equation model and we test it at industry level – for 38 manufacturing and service sectors – on eight European countries over two time periods from 1994 to 2006. The results show that the model effectively accounts for the dynamics of European industries and highlights the interconnections between the different factors contributing to growth.R&D, Innovation, Profits, Demand, System Three Stages Least Squares.

The Job Creation Effect of R&D Expenditures

In this study we use a unique database covering 25 manufacturing and service sectors for 16 European countries over the period 1996-2005, for a total of 2,295 observations, and apply GMM-SYS panel estimations of a demand-for-labour equation augmented with technology. We find that R&D expenditures have a job-creating effect, in accordance with the previous theoretical and empirical literature discussed in the paper. Interestingly enough, the labour-friendly nature of R&D emerges in both the flow and the stock specifications. These findings provide further justification for the European Lisbon-Barcelona targets.technological change, corporate R&D, employment, product innovation, GMM-SYS

Job creation in business services:Innovation, Demand, Polarisation.

The patterns and mechanisms of job creation in business services are investigated in this article by considering the role of innovation, demand, wages and the composition of employment by professional groups. A model is developed and an empirical test is carried out with parallel analyses on a group of selected business services, on other services and on manufacturing sectors,considering six major European countries over the period 1996-2007. Within technological activities a distinction is made between those supporting either technological competitiveness, or cost competitiveness. Demand variables allow identifying the special role of intermediate demand. Job creation in business services appears to be driven by efforts to expand technological competitiveness and by the fast growing intermediate demand coming from other industries; conversely, process innovation leads to job losses and wage growth has a negative effect that is lower that in other industries. Business services show an increasingly polarised employment structure.Business Services, Innovation, Employment.

R&D and Employment: Some Evidence from European Microdata

After discussing theory regarding the consequences of technological change on employment and surveying previous microeconometric literature, our aim with this paper is to test the possible job creation effect of business R&D expenditures, using a unique longitudinal database covering 677 European manufacturing and service firms over the period 1990-2008. The main outcome from the whole sample dynamic LSDVC (Least Squared Dummy Variable Corrected) estimate is the labour-friendly nature of companies’ R&D, the coefficient of which turns out to be statistically significant, although not very large in magnitude. However, the positive and significant impact of R&D expenditures on employment is detectable in services and high-tech manufacturing but absent in the more traditional manufacturing sectors. This means that we should not expect positive employment effects from increasing R&D in the majority of industrial sectors. This is something that should be borne in mind by European innovation policy makers having employment as one of their specific aims.manufacturing, employment, innovation, services, LSDVC

Aspirations and growth: a model where the income of others acts as a reference point

We study an OLG model in which the average income of the society acts as a reference point for the agents’ utility on consumption. To model this we use the functional form developed in behavioral economics to study reference-dependence: prospect theory. We then assume that: 1) the utility function is convex in an interval before the reference point; 2) the utility function is not differentiable at the reference point, and it is steeper below than above the reference point. We argue that this reference-dependence causes the economy to admit multiple equilibria, and we show that in any of these equilibria in finite time the wealth distribution will become, and remain, either polarized or of perfect equality. We then study growth rates and show that, if we look at the equilibria with the highest growth, then the society that grows the most is the one that starts with perfect equality. If we look at the equilibria with the lowest growth for each economy, however, then the society with a small amount of initial inequality is the one that grows (strictly) the most, while a society with perfect equality is the one that grows the least. All of these growth rates are weakly higher than the growth rate of a corresponding economy without reference-dependence

The Role of "Skill Enhancing Trade" in Brazil: Some Evidence from Microdata

Brazil was characterised by a marked process of trade liberalisation in the 1990s, resulting in a dramatic increase in the volumes of exports and imports since the year 2000. Over the same period, the relative demand for skilled labour has increased substantially. To investigate whether these two simultaneous phenomena are linked is the purpose of this paper. More in particular, this study focuses on the impact of trade openness and technology transfer on the relative demand for skilled labour in Brazilian manufacturing firms, using a unique panel database (resulting from merging three different statistical sources) of Brazilian manufacturing firms over the period 1997-2005. Descriptive statistics show that the increase in the relative demand for skilled labour was mainly driven by the within-industry variation, supporting the hypothesis that technology (and in particular technological transfer from richer countries) may have played a role in determining the skill-upgrading of Brazilian manufacturing firms. The econometric results further support this hypothesis. Indeed, the estimations show that domestic capital is a complement of the skilled workers and that imported capital goods clearly act as a skill-enhancing component of trade. Hence, our results support the view that embodied technological change through the importation of capital goods has involved a clear skill-biased impact in Brazilian manufacturing.skill-enhancing trade, skill-bias, panel data, Brazil

The job creation effect of R&D expenditures

In this study we use a unique database covering 25 manufacturing and service sectors for 16 European countries over the period 1996-2005, for a total of 2,295 observations, and apply GMM-SYS panel estimations of a demand-for-labour equation augmented with technology. We find that R&D expenditures have a job-creating effect, in accordance with the previous theoretical and empirical literature discussed in the paper. Interestingly enough, the labour-friendly nature of R&D emerges in both the flow and the stock specifications. These findings provide further justification for the European Lisbon-Barcelona targets