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Tapping into Talent: Coupling Education and Innovation Policies for Economic Growth

Ufuk Akcigit, Jeremy Pearce, and Marta Prato

How do innovation and education policy affect individual career choices and aggregate productivity? This paper analyzes the effect of R&D subsidies and higher education policy on productivity growth through the supply of innovative talent. We put scarce talent, higher education attainment, and career choice at the center of a new endogenous growth framework with individual-level heterogeneity in talent, financial resources, and preferences. We link the model to micro-level data from Denmark on the backgrounds of who obtains a PhD and becomes an inventor and the outcomes of a set of policy interventions.

Talent, Geography, and Offshore R&D

Jingting Fan

I model and quantify the impact of a new dimension of globalization: offshore R&D. In the model, firms employ researchers across the globe to develop new product blueprints and then engage in offshore production and exporting. Frictions impeding trade and the separation of production from R&D lead to a ‘market-access’ motive for offshore R&D, while cross-country differences in the distributions of firm knowhow and worker ability generate a ‘talent-acquisition’ motive. I discipline the model using empirical facts derived from a new firm-level dataset. Counterfactual experiments show that the two motives can account for a significant portion of the observed offshore R&D.

U.S. Market Concentration and Import Competition

Mary Amiti and Sebastian Heise

Many studies have documented that the sales concentration of U.S. producers has risen in recent decades. In this paper, we show that this increase was accompanied by more entry and growth of foreign competitors. Using confidential census data covering the universe of all firm sales in the U.S. manufacturing sector, we find that rising import competition increased concentration among U.S. firms by reallocating sales from smaller to larger U.S. firms and by causing firm exit. However, this increase in production concentration was counteracted by the expansion of foreign firms, which reduced domestic firms’ share of the U.S. market inclusive of foreign firms’ sales.

Structural Change, Elite Capitalism, and the Emergence of Labor Emancipation

Quamrul H. Ashraf, Francesco Cinnirella, Oded Galor, Boris Gershman, and Erik Hornung

This study argues that the decline of coercive labor institutions over the course of industrialization was partly driven by complementarity between physical capital and effective labor in manufacturing. Given the difficulty of extracting labor effort in care-intensive industrial tasks through monitoring and punishment, capital-owning elites ultimately chose to emancipate workers to induce their supply of effective labor and, thus, boost the return to physical capital. This hypothesis is empirically examined in the context of serf emancipation in nineteenth-century Prussia.

Wage Risk and Government and Spousal Insurance

Mariacristina De Nardi, Giulio Fella, and Gonzalo Paz-Pardo

The extent to which households can self-insure depends on family structure and wage risk. We calibrate a model of couples and singles’ savings and labor supply under two types of wage processes. The first wage process is the canonical—age-independent, linear—one that is typically used to evaluate government insurance provision. The second wage process is a flexible one. We use our model to evaluate the optimal mix of the two most common types of means-tested benefits—in-work versus income floor.

Policy Targeting under Network Interference

Davide Viviano

This paper studies the problem of optimally allocating treatments in the presence of spillover effects, using information from a (quasi-)experiment. I introduce a method that maximizes the sample analog of average social welfare when spillovers occur. I construct semi-parametric welfare estimators with known and unknown propensity scores and cast the optimization problem into a mixed-integer linear program, which can be solved using off-the-shelf algorithms. I derive a strong set of guarantees on regret, i.e., the difference between the maximum attainable welfare and the welfare evaluated at the estimated policy.

Shallow Meritocracy

Peter Andre

Meritocracies aspire to reward hard work and promise not to judge individuals by the circumstances into which they were born. However, circumstances often shape the choice to work hard. I show that people’s merit judgments are “shallow” and insensitive to this effect. They hold others responsible for their choices, even if these choices have been shaped by unequal circumstances. In an experiment, US participants judge how much money workers deserve for the effort they exert. Unequal circumstances disadvantage some workers and discourage them from working hard. Nonetheless, participants reward the effort of disadvantaged and advantaged workers identically, regardless of the circumstances under which choices are made.

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How does capital irreversibility (and other investment frictions) shape economic booms and recoveries?

I explore these ideas in this @FacultiNet video (20mins)

Based on my research with @jandres_blanco forthcoming at the @RevEconStudies

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"Winners of Excellence in Refereeing Award for 2024"

The Review of Economic Studies thanks all of the exceptional referees who have contributed their time & expertise to the journal.

Dan Cao @vudancao
Bruno Caprettini @brunocaprettini
Ryan Chahrour

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