Essays in Innovation, Automation, and Growth

Abstract

This thesis consists of three essays on the impact of technological change, innovation and automation on growth and labor market outcomes. In the first chapter, I explore how dominant companies in concentrated sectors have siphoned off inventors that might have been employed more productively in competitive industries. For the period 1997-2012, I establish that sectors with rising concentration captured a disproportionate share of researchers, while also experiencing a decrease in R&D productivity, signaled by falling forward citations and slowing growth per inventor. These findings imply that inventors became increasingly misallocated, accounting for nearly 30 percent of the decline in the average annual growth rate of output per worker over the 15-year study period. A calibration of this model reveals that a planner interested in maximizing growth should allocate R&D tax credits to entrants in high-concentration sectors.

In the second chapter (forthcoming in the Review of Economic Dynamics), Michele Fornino and I study the economic incentives for automation when labor and machines are perfect substitutes. We find that labor may still be employed in produc-tion, even when it is a costlier input than robots on a productivity-adjusted basis. This occurs if firms face uninsurable idiosyncratic risk, adjusting the stock of machines is costly, and workers can be hired and fired quickly enough. Even though labor survives, jobs become less stable, as workers are hired in short-lived bursts to cope with shocks. We calibrate a general equilibrium, multi-industry version of our model to match data on robot adoption in US manufacturing sectors, and use it to compute the employment and labor share consequences of progress in automation technology. A fall in the relative price of robots leads to relatively few jobs losses, while reductions in adjustment costs, or improvements in relative robot productivity, can be far more disruptive. The model-implied semi-elasticity of aggregate employment to robot penetration (number of robots per thousand employees) ranges between 0.01% and 0.12%, depending on the underlying source of increased robot adoption, consistent with findings in the empirical literature. In an extension, we show that reduced-form hiring and firing costs unambiguously depress long-run employment.

In the third chapter, Martina Uccioli and I study the impact of employment protection legislation (EPL) on firms innovation, through an event-study analysis of labor market reforms occurring in Europe over 2000-2016. Data from the Community Innovation Survey reveal that substantial drops in EPL for temporary workers prompt a reallocation of innovation towards the introduction of new products, away from process innovation aimed at cutting labor costs. Among innovative firms, the share of product innovators increases by 15% of the pre-reform value, while the share of firms specializing in process innovation falls by 35%. We develop a theoretical framework of directed technical change to rationalize our findings, where parsimonious assumptions imply that product innovation is strongly temporary labor complementing while process innovation is strongly temporary labor substituting.