Showing papers by "Peter Howitt published in 2009"

The effects of entry on incumbent innovation and productivity

Abstract: HERE is a long-standing interest in the effects of entry, which are widely recognized as major drivers of economic growth. Entry can induce reallocation of inputs and outputs, trigger knowledge spillovers, and affect innovation incentives in incumbent firms. The desire to induce entry by foreign firms has spurred widespread policy reforms, particularly in countries or industries behind the technology frontier. However, empirical studies of the effects of market liberalizations and inward direct investment from foreign firms provide mixed results on incumbent reactions. 1 In this paper we explore systematic variation in the response of incumbent firms to entry. We are motivated by the following empirical regularity—we see substantial heterogeneity in the correlation between greenfield foreign firm entry and incumbent productivity growth when we look across industries in the United Kingdom. In industries close to the technology frontier there is a strong and positive correlation, while a weak or even negative one is found in industries that lag behind. This is illustrated in figure 1, where we plot the annual rate of greenfield foreign firm entry in each industry-year against the respective average of subsequent total factor productivity growth in incumbent establishments. The sample is split at the median distance to the technology frontier, as measured by a labor productivity index that relates incumbents in U.K. industries to their U.S. industry equivalent. Our explanation for this variation follows from Schumpeterian growth theory—threat from frontier entrants induces incumbents in sectors that are initially close to the technology frontier to innovate more, and this triggers productivity growth, but entry threat reduces the expected rents from doing R&D for incumbents in sectors further from the frontier. In the former case, incumbent firms close to the frontier know that they can escape and survive entry by innovating successfully, and so they react with more intensive innovation activities aimed at escaping the threat.

The Economics of Growth

Abstract: This comprehensive introduction to economic growth presents the main facts and puzzles about growth, proposes simple methods and models needed to explain these facts, acquaints the reader with the most recent theoretical and empirical developments, and provides tools with which to analyze policy design. The treatment of growth theory is fully accessible to students with a background no more advanced than elementary calculus and probability theory; the reader need not master all the subtleties of dynamic programming and stochastic processes to learn what is essential about such issues as cross-country convergence, the effects of financial development on growth, and the consequences of globalization. The book, which grew out of courses taught by the authors at Harvard and Brown universities, can be used both by advanced undergraduate and graduate students, and as a reference for professional economists in government or international financial organizations. The Economics of Growth first presents the main growth paradigms: the neoclassical model, the AK model, Romer's product variety model, and the Schumpeterian model. The text then builds on the main paradigms to shed light on the dynamic process of growth and development, discussing such topics as club convergence, directed technical change, the transition from Malthusian stagnation to sustained growth, general purpose technologies, and the recent debate over institutions versus human capital as the primary factor in cross-country income differences. Finally, the book focuses on growth policies—analyzing the effects of liberalizing market competition and entry, education policy, trade liberalization, environmental and resource constraints, and stabilization policy—and the methodology of growth policy design. All chapters include literature reviews and problem sets. An appendix covers basic concepts of econometrics.

Adaptive Consumption Behavior

Abstract: This paper proposes and studies a theory of adaptive consumption behavior under income uncertainty and liquidity constraints. We assume that consumption is governed by a linear function of wealth, whose coefficients are revised each period by a procedure, which, although sophisticated, places few informational or computational demands on the consumer. We show that under a variety of settings, our procedure converges quickly to a set of coefficients with low welfare cost relative to a fully optimal nonlinear consumption function.

A Farewell to Alms: A Brief Economic History of the World. By Gregory Clark (Princeton, Princeton University Press, 2007) 420 pp. $29.95

Abstract: sharing information, and changing senses of identity. Global Environmental History is clearly intended to be a textbook, but it is hardly a volume for beginners or general readers. Densely written and argued, the book presents an enormous panoply of facts, theoretical concepts, and trends, all of which speak well to the author’s erudition. However, those who read it must have some knowledge of climatology, archaeology, and history. A beginner will oounder rapidly in these pages. This history will probably be most useful as a source book; its comprehensive bibliography is worth the price of admission. As a quickare compendium of concepts, theories, and a wide range of basic information, this book could be invaluable. As an undergraduate textbook, it is a non-starter. Nonetheless, Simmons’ courage in tackling a nearimpossible synthesis in a mere 271 pages is admirable. This is one of those occasions when author and publisher might have treated themselves to greater length. The result might have been a remarkable book.

Ajustement macroéconomique aux technologies multi-usages

Abstract: Cet article examine les effets macroeconomiques resultant de l’introduction de ce que Bresnahan et Trajtenberg appellent une « technologie multi-usages » (TMU) comme, par exemple, la technologie informatique. L’analyse est basee sur le principe qu’une nouvelle TMU accelere le rythme de changement technologique en creant une vague d’innovations secondaires destinees a ameliorer et a atteindre le potentiel de la TMU d’origine. Cet article etudie les voies a travers lesquelles une hausse du rythme de changement technologique pourrait reduire le niveau d’activite economique mesure avant de conduire l’economie a un niveau de croissance superieur. Deux voies sont l’obsolescence du capital et l’absence de mesure de l’investissement de la connaissance dans les comptes nationaux. Un modele de croissance endogene simple qui a ete construit et adapte a l’economie americaine prevoit que l’obsolescence du capital est la plus significative des deux voies, et que, dans ce cas, la production sera pendant pres de trois decennies inferieure a ce qu’elle aurait ete sans l’introduction de la nouvelle TMU.