ICT, Innovation, and Productivity Growth Connect or Disconnect

Transcription

1 ICT, Innovation, and Productivity Growth Connect or Disconnect Eric Bartelsman Vrije Universiteit Amsterdam, Tinbergen Institute, IZA Productivity Symposium Wellington December 1, 2015 Bartelsman (VU, TI) Connect Disconnect 04/22/15 1 / 30

2 Preliminaries NZ GDP/capita similar to Spain, Italy, and slightly behind South Korea, Japan, UK. Framework conditions are fine But investments in R&D and ICT are lagging Productivity has been diverging How can NZ harness the potential of ICT-led innovation? Bartelsman (VU, TI) Connect Disconnect 04/22/15 1 / 30

3 Overview Technological Prospects Modelling Growth with Knowledge Based Capital Some evidence from EU Connecting with NZ Policy Bartelsman (VU, TI) Connect Disconnect 04/22/15 2 / 30

4 Two Futures Bob Gordon (2012) Slowing of growth to 1/2 percent per year; doubling in 100 years. Of the three industrial revolutions (Steam/Railroad, Internal combustion/electricity, ICT) the latter is least impressive and already has made its mark Brynjolfsson and McAfee Growth of 2.5% per year; doubling in 30 years. New Technologies: Autonomous transport (Google car), Universal programmable robot, Data-driven expert systems, Internet of Things. Major implications for labor market Many questions how economics of innovation will be different Bartelsman (VU, TI) Connect Disconnect 04/22/15 3 / 30

5 A Driving Vision Bartelsman (VU, TI) Connect Disconnect 04/22/15 4 / 30

6 Keeping your Eye on the Boll Bartelsman (VU, TI) Connect Disconnect 04/22/15 5 / 30

7 Historical Prescience Bartelsman (VU, TI) Connect Disconnect 04/22/15 6 / 30

8 A New Crop of Applications Bartelsman (VU, TI) Connect Disconnect 04/22/15 7 / 30

9 Promising Areas for Technological Advances Clean Energy Sustainable land use New Materials Health (Biotech) Elderly Care Livable Cities, livable countryside Education, Knowledge Dissemination Managing Production, Supply Chains, Labor Markets Bartelsman (VU, TI) Connect Disconnect 04/22/15 8 / 30

10 Overview Technological Prospects Modelling Growth with Knowledge Based Capital (KBC) Some evidence Connecting with NZ Policy Bartelsman (VU, TI) Connect Disconnect 04/22/15 9 / 30

11 Dynamic Firm Models with Intangibles Intangibles are non-rival production inputs: benefits to scale Firms invest in intangibles and get uncertain productivity outcome Profit across firms becomes very skewed. Optimal size dependant on productivity outcome. Income share for labor and traditional capital low. Aggregate productivity of the economy is determined by distribution of productivity draws and by market shares Bartelsman (VU, TI) Connect Disconnect 04/22/15 10 / 30

12 Model Implications What happens when importance of KBC in economy increases: The share of income going to traditional factors decreases; labor share is falling Investment in regular capital may appear sluggish: ICT and intangibles likely are capital saving (utilization rates of traditional capital may become higher). Returns to intangible investment become increasingly skewed: While cost of startups may be decreasing, probability of success decreases as well. Bartelsman (VU, TI) Connect Disconnect 04/22/15 11 / 30

13 An Island in a World of KBC Growth Case 1: knowledge growth is random, and in proportion to population and existing knowledge. Large areas grow faster (Kremer, 1993). Remote islands suffer (and more so if new ideas depend on population density). Case 2: knowledge growth is dependent on investment and existing knowledge: Investment depends on chance of technological outcome and on scalability. With transport costs of trade: output is less scalable, thus returns to success are lower With distance and low population density: visibility of existing ideas may be low Luckily, with ICT: costs of distance are reduced and visibility of ideas increased. Bartelsman (VU, TI) Connect Disconnect 04/22/15 12 / 30

14 Overview Technological Prospects Modelling Growth with Knowledge Based Capital Some evidence Connecting with NZ Policy Bartelsman (VU, TI) Connect Disconnect 04/22/15 13 / 30

15 ICT, Innovation, and Growth in the EU Data from Linked Surveys, 14 countries, Business register and production surveys ICT Usage Survey Community Innovation Survey Micro analysis in each country Public Use Dataset (MMD): Combined cross-country information aggregated from firm-level data to country/industry/time panel Bartelsman (VU, TI) Connect Disconnect 04/22/15 14 / 30

16 Findings on Intangible Investments from MMD Penetration of new technology continues R&D, ICT use, innovative output, human capital intensity and productivity are in general correlated across firms There is a surprisingly large role for country effects in intangible investment The aggregate industry impact of intangibles is positive, while the average firm-level impact is insignificant: (re)allocation matters Variance of firm-level outcomes (productivity, sales, employment) increases with intangibles ICT-using firms grow more (output, employment, and productivity) Wage premium for ICT is rising Bartelsman (VU, TI) Connect Disconnect 04/22/15 15 / 30

17 Increasing Intangibles Source: Corrado, Hulten, Sichel (2009) Bartelsman (VU, TI) Connect Disconnect 04/22/15 16 / 30

18 ICT usage is still increasing Bartelsman (VU, TI) Connect Disconnect 04/22/15 17 / 30

19 Variation in ICT usage Across countries Bartelsman (VU, TI) Connect Disconnect 04/22/15 18 / 30

20 ICT, Innovation, and Productivity With MMD, cross-country industry panel data, we can estimate determinants of innovative activity (intangible investment) impact of innovative activity on productivity impact for firms on average, and for aggregate economy Bartelsman (VU, TI) Connect Disconnect 04/22/15 19 / 30

21 Determinants of Product Innovation Table : Probit Regression, marginal effects Variable Average Aggregate Broadband Intensity 2.29* 2.02*) Electronic Buying Electronic Selling 1.05* 0.78* ICT Human Capital 8.15* 4.42* Reallocation 0.34* 0.10 Fixed Effects c,i,t c,i,t) Obs Likelihood Fixed Effects for country, industry, size included. * denotes significance at 5%. Source: Bartelsman, van Leeuwen, Polder (2015) Bartelsman (VU, TI) Connect Disconnect 04/22/15 20 / 30

22 Determinants of Productivity Table : (log)labor Productivity regressed on predicted product innovation Variable Average Aggregate Cap/Emp * Human Cap 0.69* 1.07* Reallocation 0.32* 0.60* Predicted(Innov) * Fixed Effects c,i,t c,i,t) R Numobs Fixed Effects for country, industry, size included. * denotes significance at 5%. Source: Bartelsman, van Leeuwen, Polder (2015) Bartelsman (VU, TI) Connect Disconnect 04/22/15 21 / 30

23 ICT use and dispersion: Industry-level evidence Table : Std. Dev. of firm-level productivity distribution regressed on Broadband intensity Levels γ 0.47 (5.02) First-differences 0.28 (2.59) R D.F Fixed effects ctry, ind, time ctry, ind, time σ c,i,t = α + γbbi c,i,t + FE + ε c,i,t FE: country, industry, time fixed effects Source: ESSNet, Micro-moments database, v4.0 Bartelsman (VU, TI) Connect Disconnect 04/22/15 22 / 30

24 ICT Use and Dispersion: Firm-level evidence Table : Output Growth Dispersion by ICT intensity Time Series Cross Section Country ICT=0 ICT=1 ALL ICT=1 DK FI FR NL NO SE Source: ESSnet, Micro-moments database v3.4 Bartelsman (VU, TI) Connect Disconnect 04/22/15 23 / 30

25 ICT Use and Dispersion: Firm-level evidence Table : Productivity Growth Dispersion by ICT intensity Time Series Cross Section Country ICT=0 ICT=1 ALL ICT=1 DK FI FR NL NO SE Source: ESSnet, Micro-moments database v3.4 Bartelsman (VU, TI) Connect Disconnect 04/22/15 24 / 30

26 Wage polarization: ICT intensive vs non-intensive firms log(w ICT =1 /w ICT =0 ) c,i,t = α + γ time-trend + FE + ε c,i,t γ = 1.4(3.95): each year 1.4% larger wage difference Instead of time-trend, time dummies: coefs shown below Figure : Differential Wage Development Bartelsman (VU, TI) Connect Disconnect 04/22/15 25 / 30

27 ICT intensive vs non-intensive firms Figure : Output Growth and Employment Growth Differentials Bartelsman (VU, TI) Connect Disconnect 04/22/15 26 / 30

28 Overview Technological Prospects Modelling Growth with Knowledge Based Capital Some evidence Connecting with NZ Policy Bartelsman (VU, TI) Connect Disconnect 04/22/15 27 / 30

29 Connecting with NZ Policy Paradox: framework conditions for high intangible investment seem ok, but uptake of ICT and innovation is low Potential market size remains small owing to distance visibility of existing knowledge may be low as well As KBC and global productivity increase NZ could disconnect and fall behind further or Connection increased for small subset of product space Starting from current strengths: primary sector, instruments, digital effects, yachts, Bartelsman (VU, TI) Connect Disconnect 04/22/15 28 / 30

30 Knowledge Based Government Situation paradoxically calls for government involvement that might go beyond Anglo-Saxon innovation policy Thematic platforms Directed technical change Innovation prizes: Choose desirable thematic areas with medium- to long-term horizon Define prize for achieving well defined functional targets Provides some certainty about future revenue (conditional on technological success) Bartelsman (VU, TI) Connect Disconnect 04/22/15 29 / 30

31 Innovation in Public Goods and Services Costs of gov t services relatively high in small, low density area: improvement through innovation is crucial for competitiveness of private sector exports Innovation in the following sectors can be exported : Health care Education Transport Arts and Leisure Housing Bartelsman (VU, TI) Connect Disconnect 04/22/15 30 / 30