Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-14T23:24:24.726Z Has data issue: false hasContentIssue false
  • English
  • Français

HOW POWERFUL ARE NETWORK EFFECTS? A SKILL-BIASED TECHNOLOGICAL CHANGE APPROACH

Published online by Cambridge University Press:  14 November 2018

Oscar Afonso  and
Manuela Magalhäes
Oscar Afonso*
Affiliation:
Universidade do Porto
Manuela Magalhäes
Affiliation:
The Center for Advanced Studies in Management and Economics (CEFAGE)
*
Address correspondence to: Oscar Afonso, Universidade do Porto, Faculdade de Economia and CEFUP, Rua Dr Roberto Frias, 4200-464, Porto, Portugal; e-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Even for the standard skill-biased technological change (SBTC) literature, the generic rise in the skill premium in the face of the relative increase in skilled workers since the 1980s seems a little puzzling. We develop a general equilibrium SBTC growth model that allows the dominance of either the price channel or the market-size channel mechanism through which network spillovers affect the technological-knowledge bias and, thus, the paths of intra-country wage inequality. The proposed mechanisms can accommodate facts not explained by the earlier literature.

Keywords

Network EffectsTechnological-Knowledge BiasSkill PremiumEconomic Growth
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 4 , June 2020 , pp. 882 - 919
Copyright
© Cambridge University Press 2018

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We would like to thank the Editor and two anonymous Referees for their comments and suggestions. CEFUP and CEFAGE-UBI have financial support from FCT, Portugal, and FEDER/COMPETE 2020, through grant UID/ ECO/04007/2013 (respectively, POCI-01-0145-FEDER-006890 and POCI-01-0145-FEDER-007659).

References

Acemoglu, D. (1998) Why do new technologies complement skills? Directed technical change and wage inequality. Quarterly Journal of Economics 113(4), 1055–1089.CrossRefGoogle Scholar
Acemoglu, D. (2002) Directed technical change. Review of Economic Studies 69(4), 781–809.CrossRefGoogle Scholar
Acemoglu, D. (2003) Cross-country inequality trends. Economic Journal 113(485), F121–F149.CrossRefGoogle Scholar
Acemoglu, D. and Autor, D. (2011) Skills, tasks and technologies: Implications for employment and earnings. Handbook of Labor Economics 4, 1043–1171.CrossRefGoogle Scholar
Acemoglu, D., Carvalho, V. M., Ozdaglar, A. and Salehi, A. T. (2012) The network origins of aggregate fluctuations. Econometrica 80(5), 1977–2016.Google Scholar
Acemoglu, D. and Zilibotti, F. (2001) Productivity differences. Quarterly Journal of Economics 116(2), 563–606.CrossRefGoogle Scholar
Afonso, O. (2006) Skill-biased technological knowledge without scale effects. Applied Economics 38(1), 13–21.CrossRefGoogle Scholar
Afonso, O. (2008) The impact of government intervention on wage inequality without scale effects. Economic Modelling 25(2), 351–362.CrossRefGoogle Scholar
Afonso, O. (2012) Scale-independent north-south trade effects on the technological-knowledge bias and on wage inequality. Review of World Economics 148(1), 181–207.CrossRefGoogle Scholar
Aghion, P. and Howitt, P. (1992) A model of growth through creative destruction. Econometrica 60(2), 323–351.CrossRefGoogle Scholar
Aghion, P. and Jaravel, X. (2015) Knowledge spillovers, innovation and growth. Economic Journal 125(583), 533–573.CrossRefGoogle Scholar
Akerman, A., Gaarder, I. and Mogstad, M. (2015) The skill complementarity of broadband internet. Quarterly Journal of Economics 130(4), 1781–1824.CrossRefGoogle Scholar
Alesina, A., Spolaore, E. and Wacziarg, R. (2005) Trade, growth and the size of countries. Handbook of Economic Growth 1B, 1499–1542.CrossRefGoogle Scholar
Ang, J. B. and Madsen, J. B. (2015) What drives ideas production across the world? Macroeconomic Dynamics 19(01), 79–115.CrossRefGoogle Scholar
Antras, P., Chor, D., Fally, T. and Hillberry, R. (2012) Measuring the upstreamness of production and trade flows. American Economic Review 1020 (3), 412–416.CrossRefGoogle Scholar
Arrow, K. (1962) Economic welfare and the allocation of resources for invention. In The Rate and Direction of Economic Activity. New York: Princeton University Press.Google Scholar
Atalay, E., Hortacsu, A., Roberts, J. and Syverson, C. (2011) Network structure of production. Proceedings of the National Academy of Sciences 1080 (13), 5199–5202.CrossRefGoogle Scholar
Autor, D. H., Katz, L. F. and Kearney, M. S. (2008) Trends in U.S. wage inequality: Revising the revisionists. Review of Economics and Statistics 90(2), 300–323.CrossRefGoogle Scholar
Autor, D. H. (2014) Skills, education, and the rise of earnings inequality among the “other 99 percent.” Science 344, 843–851.CrossRefGoogle Scholar
Avalos, A. and Savvides, A. (2006) The manufacturing wage inequality in Latin America and East Asia: Openness, technology transfer, and labor supply. Review of Development Economics 10(4), 553–576.CrossRefGoogle Scholar
Barro, R. J. and Sala-i-Martin, X. (2004) Economic Growth, 2nd ed. Cambridge, MA: MIT Press.Google Scholar
Bertolotti, F., Mattarelli, E., Vignoli, M. and Macrì, D. M. (2015) Exploring the relationship between multiple team membership and team performance: The role of social networks and collaborative technology. Research Policy 44(4), 911–924.CrossRefGoogle Scholar
Bloom, N., Schankerman, M. and Van Reenen, J. (2013) Identifying technology spillovers and product market rivalry. Econometrica 81(4), 1347–1393.Google Scholar
Brainerd, E. (1998) Winners and losers in Russia’s economic transition. American Economic Review, 88(5), 1094–1116.Google Scholar
Carvalho, V. M. (2014) From micro to macro via production networks. Journal of Economic Perspectives 28(4), 23–48.CrossRefGoogle Scholar
Chaney, T. (2014) The network structure of international trade. American Economic Review 104(11), 3600–3634.CrossRefGoogle Scholar
Cohen, L. and Frazzini, A. (2008) Economic links and predictable returns. Journal of Finance 63(4), 1977–2011.CrossRefGoogle Scholar
Cohen, W. M. and Levinthal, D. A. (1989) Innovation and learning: The two faces of R&D. Economic Journal 99(397), 569–596.CrossRefGoogle Scholar
Cozzi, G. and Galli, S. (2009) Science-based R&D in Schumpeterian growth. Scottish Journal of Political Economy 56(4), 474–491.CrossRefGoogle Scholar
Crino, R. (2005) Wages, skills, and integration in Poland, Hungary and the Czech Republic: An industry-level analysis. Transition Studies Review 12(3), 432–459.CrossRefGoogle Scholar
D’Aspremont, C. and Jacquemin, A. (1988) Cooperative and noncooperative R&D in duopoly with spillovers. American Economic Review 78(5), 1133–1137.Google Scholar
David, P. A. (1990) The dynamo and the computer: An historical perspective on the modern productivity paradox. American Economic Review 80(2), 355–361.Google Scholar
Dijkstra, E. (1959) A note on two problems in connexion with graphs. Numerische Mathematik 1(1), 269–271.CrossRefGoogle Scholar
Dinopoulos, E. and Thompson, P. (1999) Scale effects in Schumpeterian models of economic growth. Journal of Evolutionary Economics 9(2), 157–185.CrossRefGoogle Scholar
Dinopoulos, E. and Thompson, P. (2000) Endogenous growth in a cross-section of countries. Journal of International Economics 51(2), 335–362.CrossRefGoogle Scholar
Fadinger, H., Ghiglino, C. and Teteryatnikova, M. (2016) Income Differences and Input-Output Structure. Centre for Economic Policy Research (CEPR) Discussion Paper No. DP11547.Google Scholar
Fernald, J. G. (2015) Productivity and potential output before, during, and after the great recession. NBER Macroeconomics Annual 29(1), 1–51.CrossRefGoogle Scholar
Gil, P., Afonso, O. and Vasconcelos, P. (2016) A note on skill-structure shocks, the share of the high-tech sector and economic growth dynamics. Macroeconomic Dynamics 20(7), 1906–1923.CrossRefGoogle Scholar
Goldin, C. D. and Katz, L. F. (2008) The Race Between Education and Technology. Cambridge, MA: Harvard University Press.Google Scholar
Gordon, R. J. (2012) Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds. Technical Report, National Bureau of Economic Research.CrossRefGoogle Scholar
Grossmann, V., Steger, T. and Trimborn, T. (2013) Dynamically optimal R&D subsidization. Journal of Economic Dynamics and Control 37(3), 516–534.CrossRefGoogle Scholar
Guan, J. C., Zuo, K. R., Chen, K. H. and Yam, R. C. M. (2016) Does country-level R&D efficiency benefit from the collaboration network structure? Research Policy 45(4), 770–784.CrossRefGoogle Scholar
Ha, J. and Howitt, P. (2007) Accounting for trends in productivity and R&D: A Schumpeterian critique of semi-endogenous growth theory. Journal of Money, Credit and Banking 39(4), 733–774.CrossRefGoogle Scholar
Hagedoorn, J. and Duysters, G. (2002) External sources of innovative capabilities: The preference for strategic alliances or mergers and acquisitions. Journal of Management Studies 39(2), 167–188.CrossRefGoogle Scholar
Hall, R. E., Blanchard, O. J. and Hubbard, R. G. (1986) Market structure and macroeconomic fluctuations. Brookings Papers on Economic Activity 1986(2), 285–338.CrossRefGoogle Scholar
Hausmann, R. and Hidalgo, C. (2011) The network structure of economic output. Journal of Economic Growth 16(4), 309–342.CrossRefGoogle Scholar
He, H. (2012) What drives the skill premium: Technological change or demographic variation? European Economic Review 56(8), 1546–1572.CrossRefGoogle Scholar
Jackson, M. O. (2008) Social and Economic Networks. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Jackson, M. O. (2011) An overview of social networks and economic applications. In Jess Benhabib, A. B., and Jackson, M. O. (eds.), Handbook of Social Economics, Volume 1, pp. 511–585. Amsterdam: North-Holland.Google Scholar
Jackson, M. O. (2016) The past and future of network analysis in economics. In: Bramoullé, Y., Galeotti, A., and Rogers, B. (eds.) The Oxford Handbook on the Economics of Networks. Oxford: Oxford University Press.Google Scholar
Jones, C. I. (1995a) R&D-based models of economic-growth. Journal of Political Economy 103(4), 759–784.CrossRefGoogle Scholar
Jones, C. I. (1995b) Time-series tests of endogenous growth-models. Quarterly Journal of Economics 110(2), 495–525.CrossRefGoogle Scholar
Jones, C. I. and Williams, J. C. (2000) Too much of a good thing? The economics of investment in R&D. Journal of Economic Growth 5(1), 65–85.CrossRefGoogle Scholar
Juhn, C., Murphy, K. M. and Pierce, B. (1993) Wage inequality and the rise in returns to skill. Journal of Political Economy 101(3), 410–442.CrossRefGoogle Scholar
Kamien, I. M., Muller, E. and Zang, I. (1992) Research joint ventures and R&D cartels. American Economic Review 82(5), 1293–1306.Google Scholar
Kamien, M. I. and Zang, I. (2000) Meet me halfway: Research joint ventures and absorptive capacity. International Journal of Industrial Organization 18(7), 995–1012.CrossRefGoogle Scholar
Kasparov, G. K., Levchin, M. and Thiel, P. A. (2012) The Blueprint: Reviving Innovation, Rediscovering Risk, and Rescuing the Free Market. New York: WW Norton & Company.Google Scholar
Katz, L. F. and Murphy, K. M. (1992) Changes in relative wages, 1963-1987: Supply and demand factors. Quarterly Journal of Economics 107(1), 35–78.CrossRefGoogle Scholar
Katz, L. F., Krueger, A. B. and Autor, D. H. (1998) Computing inequality: Have computers changed the labor market? Quarterly Journal of Economics 113(4), 1169–1213.Google Scholar
König, M., Liu, X. and Zenou, Y. (2014) R&D Networks: Theory, Empirics and Policy Implications. CEPR Discussion Paper No. DP9872.Google Scholar
Kranz, D. F. (2006) Why has wage inequality increased more in the USA than in Europe? An empirical investigation of the demand and supply of skill. Applied Economics 38(7), 771–788.CrossRefGoogle Scholar
Kwan, Y. K. and Lai, E. L.-C. (2003) Intellectual property rights protection and endogenous economic growth. Journal of Economic Dynamics and Control 27(5), 853–873.CrossRefGoogle Scholar
Landes, D. (1969) The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present. New York, NY: Press Syndicate of the University of Cambridge.Google Scholar
Leiponen, A. (2005) Skills and innovation. International Journal of Industrial Organization 23(5-6), 303–323.CrossRefGoogle Scholar
Machin, S. and Van Reenen, J. (1998) Technology and changes in skill structure: Evidence from seven OECD countries. Quarterly Journal of Economics 113(4), 1215–1244.CrossRefGoogle Scholar
Magalhães, M. (2018) Inter-Sector Technology Spillover Effects on Technology Diffusion: A Social Network Analysis. Available at SSRN: https://ssrn.com/abstract=3243493 or http://dx.doi.org/10.2139/ssrn.3243493.CrossRefGoogle Scholar
McAdam, P. and Willman, A. (2018) Unraveling the skill premium. Macroeconomic Dynamics, 22, 33–62.CrossRefGoogle Scholar
Mohnen, P. and Röller, L.-H. (2005) Complementarities in innovation policy. European Economic Review 49(6), 1431–1450.CrossRefGoogle Scholar
Montresor, S. and Marzetti, G. V. (2009) Applying social network analysis to input-output based innovation matrices: An illustrative application to six OECD technological systems for the middle 1990s. Economic Systems Research 21(2), 129–149.CrossRefGoogle Scholar
Neto, A., Afonso, O., and Silva, S. (2017) How powerful are trade unions? A skill-biased technological change approach. Macroeconomic Dynamics, 1–45.Google Scholar
Nickell, S. and Bell, B. (1996) Changes in the distribution of wages and unemployment in OECD countries. American Economic Review 86(2), 302–308.Google Scholar
O’Mahony, M. and Vecchi, M. (2009) R&D, knowledge spillovers and company productivity performance. Research Policy 38(1), 35–44.CrossRefGoogle Scholar
Parello, C. P. (2008) A north-south model of intellectual property rights protection and skill accumulation. Journal of Development Economics 85(1-2), 253–281.CrossRefGoogle Scholar
Peretto, P. and Smulders, S. (2002) Technological distance, growth and scale effects. Economic Journal 112(481), 603–624.CrossRefGoogle Scholar
Peretto, P. F. (1998) Technological change and population growth. Journal of Economic Growth 3(4), 283–311.CrossRefGoogle Scholar
Powell, W. W., White, D. R., Koput, K. W. and Owen-Smith, J. (2005) Network dynamics and field evolution: The growth of interorganizational collaboration in the life sciences. American Journal of Sociology 110(4), 1132–1205.CrossRefGoogle Scholar
Riccaboni, M. and Pammolli, F. (2002) On firm growth in networks. Research Policy 31(8), 1405–1416.CrossRefGoogle Scholar
Robertson, R. (2004) Relative prices and wage inequality: Evidence from Mexico. Journal of International Economics 64(2), 387–409.CrossRefGoogle Scholar
Roijakkers, N. and Hagedoorn, J. (2006) Inter-firm R&D partnering in pharmaceutical biotechnology since 1975: Trends, patterns, and networks. Research Policy 35(3), 431–446.CrossRefGoogle Scholar
Romer, P. M. (1990) Endogenous technological change. Journal of Political Economy 98(5), S71–S102.CrossRefGoogle Scholar
Rosenberg, N. (1982) Inside the Black Box: Technology and Economics, Volume 6. Cambridge: Cambridge University Press.Google Scholar
Rosenkopf, L. and Padula, G. (2008) Investigating the microstructure of network evolution: Alliance formation in the mobile communications industry. Organization Science 19(5), 669–687.CrossRefGoogle Scholar
Spence, M. (1984) Cost reduction, competition, and industry performance. Econometrica 52(1), 101–121.CrossRefGoogle Scholar
Timmer, M. P., Erumban, A. A., Los, B., Stehrer, R. and de Vries, G. J. (2014) Slicing up global value chains. Journal of Economic Perspectives 28(2), 99–118.CrossRefGoogle Scholar
Tomasello, M. V., Tessone, C. J. and Schweitzer, F. (2015) Quantifying knowledge exchange in R&D networks: A data-driven model. Available at https://www.sg.ethz.ch/media/publication_files/SSRN-id2635945.pdf.CrossRefGoogle Scholar
Tomasello, M. V., Napoletano, M., Garas, A. and Schweitzer, F. (2016) The rise and fall of R&D networks. ISI Growth Working paper 8/2016, available at: http://www.isigrowth.eu/wp-content/uploads/2016/03/working_paper_2016_8.pdf.Google Scholar
Weitzman, M. L. (1998) Recombinant growth. Quarterly Journal of Economics 113(2), 331–360.CrossRefGoogle Scholar
Zhu, S. C. and Trefler, D. (2005) Trade and inequality in developing countries: A general equilibrium analysis. Journal of International Economics 65(1), 21–48.CrossRefGoogle Scholar