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« Back to Results

Innovation and Welfare Issues

Paper Session

Saturday, Jan. 6, 2018 2:30 PM - 4:30 PM

Pennsylvania Convention Center, 106-A
Hosted By: Society of Government Economists
  • Chair: Carol Corrado, Conference Board

The Effects of Technical Change: Does Capital Aggregation Matter?

Paul Gaggl
,
University of North Carolina-Charlotte
Maya Eden
,
World Bank

Abstract

This paper investigates the role of capital aggregation for quantifying the effects of technological
change. We particularly study the effects on aggregate output and on the division of income between capital and labor. We show that, for a given aggregate technological improvement, the effects on output and the labor share can be anywhere between very small (almost zero for the labor share) and substantial, depending on the source of technological change. Most importantly, the more concentrated technological imporvements are in factors that are highly substitutable with labor, the larger the effects on output and the labor share. Intuitively, this is because labor is effectively in fixed supply and is therefore a key limiting factor of growth in the presence of capital-labor complementarities. This insight is particularly importantin light of the recent interest in the effect of information and computing technology (ICT) on the aggregate labor share.

Globalization and Inequality in Innovation: A Perspective from U.S. R&D Tax Credit Policy

Wendy Li
,
U.S. Bureau of Economic Analysis
Maksim Belenkiy
,
U.S. International Trade Administration
Susan Xu
,
U.S. International Trade Administration

Abstract

New Abstract:
Many OECD countries, including the U.S., have adopted research and development (R&D) tax credit policy to encourage innovations, especially for those small and medium enterprises (SMEs) that do not have relatively abundant financial resources like their counterparts, the industry incumbents. But countries are different in the design of tax mechanisms. Moreover, studies have shown that smaller firms are important job generators and more innovative than larger firms (Klette and Kortum, 2004; Michaelidou et al., 2011). However, both U.S. and OECD data show that large firms dominate the R&D investments not only domestically but also globally. For example, the U.S. National Science Foundation reports that more than 80% manufacturing R&D are undertaken by large firms and the OECD Science, Technology and Industry Scoreboard of 2015 reports that more than 60% of global R&D is done by only 250 companies. Moreover, compared with their large incumbents, SMEs are more vulnerable in the increasing global competition environment. Therefore, it is important to investigate whether in the U.S., the R&D tax credit policy stimulates SMEs to invest more in R&D, whether firms in different industries exhibit different R&D investment patterns, how the differences relate to the degree of their exposure to import competition. In addition, regions such as Silicon Valley provide startups a better chance to get funded and then get success. It will then be important to also examine whether there is a regional effect and whether the regional effect dominates the impacts of R&D tax credit. To our knowledge, there is no research answering those questions. This research aims to fill in the gap.

The Digital Economy, New Products and Consumer Welfare

Kevin J. Fox
,
University of New South Wales-Sydney
W. Erwin Diewert
,
University of British Columbia and University of New South Wales-Sydney

Abstract

Benefits of the Digital Economy are evident in everyday life, but there are significant concerns that these benefits may not be appropriately reflected in official statistics. Statistical agencies are typically unable to measure the benefits that result from introduction of such new goods and services. The measurement of the net benefits of new and disappearing products depends on what type of index the statistical agency is using to deflate final demand aggregates. We examine this measurement problem when the agency uses any standard price index formula for its deflation of the value aggregate, such as GDP. An Appendix applies the methodology to the problem of measuring the effects of product substitutions for disappearing items.

The Production and Distribution of User-generated Content

Jon Samuels
,
U.S. Bureau of Economic Analysis
Rachel Soloveichik
,
U.S. Bureau of Economic Analysis

Abstract

"Websites such as Twitter or Reddit combine three separate categories of ‘free’ content: 1) software platforms which host and distribute content. These software platforms are typically supported by advertising revenue; 2) Professionally generated content such as articles or videos. This content is typically supported by marketing; 3) User-generated content such as Tweets or Reddit articles. This content is often created and supported by amateurs working without payment. Previous research on valuing ‘free’ content in GDP has focused on the first two categories only (Nakamura, Samuels, Soloveichik 2016) and (Nakamura, Samuels and Soloveichik 2017). In this paper, we study the provision of user-generated content and its relation to the GDP and productivity accounts.
Because user-generated content is produced by amateurs and distributed without cost, it fits squarely within household production and is beyond the scope of the official GDP accounts. Nevertheless, national accountants have long studied household production and other non-market activities in satellite accounts which are broader in scope than the official GDP accounts (Bridgman 2012). It is almost nonsensical to study the value of the internet without recognizing that a potentially large portion of its value is related to user-generated content. This paper uses data from the Technology User Profile to create a prototype satellite account tracking the Internet. We then compare our satellite account with other components of household production like cooking or yard work.
"
Discussant(s)
David G. Wiczer
,
Federal Reserve Bank of St. Louis and State University of New York-Stony Brook
Ed Steinmueller
,
University of Sussex
Mun Ho
,
Harvard University and Resources for the Future
David Byrne
,
Federal Reserve Board
JEL Classifications
  • O3 - Innovation; Research and Development; Technological Change; Intellectual Property Rights
  • E0 - General