Importance of Studying Innovations in Payment Technologies
For several years, economists at the St. Louis Fed have been studying innovations in payment technologies such as cryptocurrencies and blockchain, James Bullard writes.
Productivity Slowdown: Reducing the Measure of Our Ignorance
Growth accounting suggests that the bulk of the post-2004 slowdown in output growth in the U.S. is attributed to a residual called TFP. In this paper we provide a tractable accounting framework with firm heterogeneity to link this residual to innovations, markup dispersion, and potential measurement errors. Theories of creative destruction offer rich testable predictions of how the quality upgrading of products, the process efficiency of different firms, and markup dispersion in the market interact and therefore constitute a key approach to shed light on the slowdown in TFP growth. Surveying ...
Venture Capital: A Catalyst for Innovation and Growth
This article studies the development of the venture capital (VC) industry in the United States and assesses how VC financing affects firm innovation and growth. The results highlight the essential role of VC financing for U.S. innovation and growth and suggest that VC development in other countries could promote their economic growth.
The Agglomeration of American Research and Development Labs
We employ a unique data set to examine the spatial clustering of about 1,700 private research and development (R&D) labs in California and across the Northeast corridor of the United States. Using these data, which contain the R&D labs? complete addresses, we are able to more precisely locate innovative activity than with patent data, which only contain zip codes for inventors? residential addresses. We avoid the problems of scale and borders associated with using fixed spatial boundaries, such as zip codes, by developing a new point pattern procedure. Our multiscale core-cluster approach ...
Research Spotlight on "Who Becomes an Inventor in America? The Importance of Exposure to Innovation." Alex Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova, and John Van Reenen. Quarterly Journal of Economics, May 2019, vol. 134, no. 2, pp. 647?713.
Geographic Patterns of Innovation Across U.S. States: 1980-2010
The distribution of innovation in the United States has become more concentrated and has shifted to the West.
Barriers to Creative Destruction: Large Firms and Nonproductive Strategies
This working paper reviews recent empirical evidence on large firms and nonproductivestrategies that hinder creative destruction and reallocation. The focus is on three types ofnonproductive strategies: political connections, nonproductive patenting, and anticompetitiveacquisitions. Across different contexts using granular micro data sets, we overwhelmingly see that asfirms gain market share, they increasingly rely on nonproductive strategies but reduce theirproductive, innovation-based strategies. I also discuss theoretical channels, aggregate implications,and potentials for some policies.
Connecting to Power: Political Connections, Innovation, and Firm Dynamics
How do political connections affect firm dynamics, innovation, and creative destruction? To answer this question, we build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model generates a number of theoretical testable predictions and highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity. We test the predictions of our model using a brand-new dataset on Italian firms and their workers. Our dataset spans the ...
Innovation, Diffusion, and Trade: Theory and Measurement
I develop a multicountry-model in which economic growth is driven mainly by domestic innovation and the adoption of foreign technologies embodied in traded intermediate goods. Fitting the model to data on innovation, output per capita, and trade in varieties for the period 1996-2007, I estimate the costs of both domestic innovation and adopting foreign innovations, and then decompose the sources of economic growth around the world. I find that the adoption channel has been especially important in developing countries, and accounts for about 65% of their ?embodied? growth. Developed countries ...
How Speculation Affects the Market and Outcome-Based Values of Innovation
nnovation booms often coincide with speculative bubbles. Using data on over 1 million patents, we document two ways in which speculation creates a disconnect between the market valuation of innovation and its actual economic impact. First, an innovation during bubbles raises the stock price of its creator by 40 percent more than is justified by future outcomes. Next, competitors' stock prices move little during bubbles despite their profits suffering. We present a theory of investor disagreement about which firms will succeed that reconciles both facts. Policymakers should account for the ...