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Finance, Innovation, and Growth

Paper Session

Sunday, Jan. 7, 2024 10:15 AM - 12:15 PM (CST)

Grand Hyatt, Travis B
Hosted By: Econometric Society
  • Chair: Colin Ward, University of Minnesota

Appropriated Growth

Yuchen Chen
,
University of Minnesota
Xuelin Li
,
Columbia University
Richard T. Thakor
,
University of Minnesota
Colin Ward
,
University of Minnesota

Abstract

We build a novel structural growth model that features a dynamic agency conflict and knowledge spillovers to assess how labor mobility affects economic growth. Our calibration to US data targets responses of employee turnover and firms' intangible investment rates to variation in workers' outside option values that are identified by state-level changes in degrees of non-compete enforcement. Counterfactual analysis finds that the current degree of restrictions across states on labor mobility are close to being growth maximizing.

A Model of the Data Economy

Maryam Farboodi
,
Massachusetts Institute of Technology
Laura Veldkamp
,
Columbia University

Abstract

In a data economy, transactions of goods and services generate information, which is stored, traded and depreciates. How are the economics of this economy different from traditional production or innovation economies? How do these differences matter for measurement of GDP, firm values, depreciation rates, welfare and externalities? Despite incorporating active experimentation and data as an intangible asset, we devise a tractable recursive representation.

Because the resulting model maps to many observable macro and finance measures, it can be calibrated and estimated like its old-economy DSGE counterpart. The model also delivers insights: It rationalizes why apps are often “free,” why firm size is diverging and why even non-digital economic activity might be greater than GDP suggests.

Specialization in a Knowledge Economy

Yueyuan Ma
,
University of California-Santa Barbara

Abstract

Using firm-level data from the US Census Longitudinal Business Database (LBD), this paper exhibits novel evidence about a wave of specialization experienced by US firms in the 1980s and 1990s. Specifically: (i) Firms, especially innovating ones, decreased production scope, i.e., the number of industries in which they produce. (ii) Innovation and production separated, with small firms specializing in innovation and large firms in production. Higher patent trading efficiency and stronger patent protection are proposed to explain these phenomena. An endogenous growth model is developed with potential mismatches between innovation and production. Calibrating the model suggests that increased trading efficiency and better patent protection can explain 25% of the observed production scope decrease and 58% of the innovation and production separation. They result in a 0.64 percent point increase in the annual economic growth rate. Empirical analyses provide evidence of causality from pro-patent reforms in the 1980s to firms' production scope shrinkage.
JEL Classifications
  • O1 - Economic Development
  • O3 - Innovation; Research and Development; Technological Change; Intellectual Property Rights