Etla » Working Papers

Industry restructuring in the ICT sector – What does labor mobility tell us about skill relatedness and knowledge spillovers?

Tuomo Nikulainen — Wed, 28 Aug 2013 07:09:52 +0000

Industries go through different phases of evolution where old skills become obsolete and new skills arecrucial for the industrial renewal process. Industry evolution is usually addressed from the perspectives of production and exports, leaving one factor largely unexplored: human capital. Industry restructuring isa dynamic process where skills developed in one industry move to other industries as individuals change employers. We argue that the labor flows between industries reveal skill relatedness because individuals move to industries that value their existing skills. We also argue that the labor flows differ between highand low-skill labor. By examining these flows, we can identify spillover effects between industries during restructuring. To address this argument, we analyze all individual-level labor flows originating from the Finnish ICT sector for 1989-2010. This industry sector-level study focuses on three ICT industries (manufacturing, services and software), and we address the differences in labor mobility between the individuals with different professional skill levels. We find several differences in the labor market dynamics over time for each ICT industry and for the different skill levels.

Subsidies, Shadow of Death and Productivity

Heli Koski — Mon, 05 Aug 2013 12:48:36 +0000

Our panel data from over 10,000 Finnish firms during the years 2003-2010 sheds light on the effect of different business subsidies on firm productivity performance and on the relationship between firms’ lagged labor productivity and market exit. We find that not any of the subsidy types have statistically significant short-term or longer term impacts on the firms’ productivity performance. It seems that particularly employment and investment subsidies tend to be allocated to the relatively less efficient companies. We further observe that a decline in the firm’s lagged labor productivity levels are clearly more weakly related to the subsidized firms’ exit than to the exit of firms that have not received any subsidies. Our empirical findings thus hint that the allocation of subsidies to the relatively inefficient firms increases their liquidity making their market exit less likely than it would be otherwise. In other words, our data indicate that subsidy allocation weakens the shadow of death phenomenon observed in the previous empirical studies and hinders the process of creative destruction in the economy.

Empirical Evaluation of the Effectiveness of Competition Policy

Heli Koski — Thu, 01 Aug 2013 10:29:04 +0000

This study evaluates the usefulness of different modifications of empirical models estimating the so-called Boone indicator for capturing changes in the intensity of competition. We use as “natural experiments” in this evaluation data from three cartel cases: i) international elevators and escalators cartel in various European countries during the years 1995-2004, ii) Finnish raw wood cartel during the years 1997-2004, and iii) Finnish construction cartel 1994-2002. The findings support our argument that particularly when the primary interest is to evaluate the effectiveness of a certain competition policy action, the empirical model should properly take into account a possible structural break in data due to the policy action. Furthermore, our data hint that the methodological choice of prior empirical studies to use data only from one industry at a time may lead into the false conclusions when the Boone indicator is used for evaluating the effectiveness of sector-specific competition policy actions.

Convergence, income distribution, and the economic crisis in Europe

Ville Kaitila — Tue, 25 Jun 2013 06:02:57 +0000

We analyse the Sigma convergence (standard deviation divided by average) of purchasing power adjusted GDP per capita and GDP per hour worked in the European Union. We also link the development in income distribution as measured by Gini coefficients to convergence. With short pauses, there has been a long term trend of GDP per capita convergence in the European Union after 1960. The Great Recession was a shock to the development, and convergence within the EU-15 has suffered considerably. The largest relative declines have occurred in Cyprus, Greece, Italy, Portugal and Spain. On the other hand, the ex-transition countries have mostly continued their catching up. Historically, convergence in the EU has been faster when aggregate GDP growth has been faster. We also find that income disparities measured by Gini coefficients are negatively related to GDP per capita levels. Convergence was not correlated with changes in income distribution in 2000–2011 except for a group of six catching-up countries where we find a positive relation. We also find that there has occurred Sigma convergence in national Gini coefficients

Commercialization or Engagement: Which Is of More Significance to the U.S. Economy ?

Kaija Hyvönen-Rajecki — Thu, 13 Jun 2013 13:25:16 +0000

Beginning with the commercialization of genetic engineering (biotechnology) research beginning in the late 1970s and the passage of the Bayh-Dole Act, U.S. university administrators quickly built technology licensing (transfer) offices meant to commercialize inventions made by their researchers. By studying technology transfer in electrical engineering and computer science, statistics and mathematics, scientific instruments, and agriculture, this article demonstrates that biotechnology model does not accurately portray the ways in which most university technology is transferred to society. The application of the biotechnology/technology licensing office model to other university disciplines may stifle the diffusion of technology to society due to undue restrictions in the flow of technology; both from the university to society and, as important, the flow of ideas and resources from society to the university. Finally, it cautions against making wholesale changes in current institutional arrangements on the basis of the current U.S.-centric model based on biotechnology. For European policy-makers, the temptation to follow the U.S biotechnology-derived model may disrupt long-standing and quite successful channels of information transfer, while not bringing the supposed benefits of the U.S. model. This is particularly true because research on European university technology transfer is still at a very early stage

Specialisation and/or Convergence: Structure of European Exports and Production

Ville Kaitila — Thu, 13 Jun 2013 13:08:49 +0000

We analyse the degree of EU countries’ specialisation in their exports and manufacturing value added using the Herfindahl-Hirschmann index and the degree of structural similarity using the similarity index developed by Finger and Kreinin (1979). We also analyse the convergence of GDP growth rates over time and compare it with export similarity. At the industry level (HS2), EU15 countries’ exports became more specialised before the introduction of the euro and less specialised thereafter. However, exports have become more specialised at the product level (HS6) during the euro years. Manufacturing value added (21 sectors) has become more specialised both before and after 1999. The results for the ten ex-transition countries’ exports are different reflecting their economic transformation. Also the post-2008 period with economic distress creates special cases. Export structures became more similar before 2008. However, manufacturing value added similarity decreased. GDP growth rates have been more uniform after the introduction of the euro than in 1992–1999. We find that similarity in export structures is positively associated with the degree of GDP growth rate correlation vis-à-vis the Euro Area average. There are a half a dozen outliers that differ in their GDP growth developments, among them the Euro Area members Greece, Malta and Slovakia

Allocation and industry productivity: Accounting for firm turnover

Mika Maliranta — Mon, 27 May 2013 07:07:10 +0000

Recent macroeconomic literature has stressed the importance of resource allocation between firms for aggregate productivity. An important issue, therefore, is how to measure allocative efficiency. We compare popular indicators of allocative efficiency, paying special attention to firm turnover. We first show how entering and exiting firms contribute to aggregate productivity and to the Olley-Pakes (OP) covariance component, which is currently the most popular measure of allocative efficiency. Our data cover essentially all firms and plants in the Finnish business sector. We then build a model of firm dynamics with endogenous turnover that is consistent with the main patterns of our empirical results and use it to test how well alternative indicators capture different allocation distortions. Our results demonstrate how and why commonly used indicators fail to capture certain distortions because of endogenous changes in firm turnover.

Resource allocation in health care processes: A case study

Antti Kauhanen — Thu, 23 May 2013 12:51:53 +0000

This paper utilizes queuing models to analyze health care processes. We extend previous queuing models to allow for i) heterogeneous resources, ii) resource allocation to various tasks, and iii) teams (complementary resources). We model a process of one clinical unit. We use the model to analyze how resource allocation affects both process performance and utilization of resources. This approach emphasizes how allocation of resources to tasks affects process performance. We illustrate how the model can be used to analyze how variations in resources affect process performance and for example how ICT affects process performance.

Generating commercial ideas in Finnish universities. The role of interdisciplinarity and networking

Tuomo Nikulainen — Fri, 03 May 2013 06:33:28 +0000

Existing research argues that the keys to generating industry-relevant knowledge are interdisciplinary and networked research. The aim of this paper is to address statistically whether interdisciplinary and networked research are related to a higher potential to generate ideas with significant commercial value. Using a unique survey of academics in Finland, we identify several factors that relate to idea generation. In different types of research networks, we find a positive connection to an interdisciplinary work environment and networking. We also identify significant differences among fields of research.

Commercialization of academic research. A comparison between researchers in the U.S. and Finland

Tuomo Nikulainen — Fri, 03 May 2013 06:16:48 +0000

This paper aims to identify factors that relate to scientists’ propensity to make commercially significant scientific discoveries (inventions) and to describe how these inventions are commercialized. Based on a large survey of academics active in different fields of science at U.S. universities, the paper benchmarks the top 20 universities against the rest, identifying the impact of different institutional settings. To highlight the institutional setting, the paper also compares these results to similar survey data from Finland, representing a small, highly educated European country. This comparison addresses the ‘European paradox’ in university technology commercialization, which is characterized by high investments in university research and disappointingly low levels of inventions and related commercialization activity. The results show that the likelihood of making commercially valuable scientific discoveries in the U.S. is driven by motivations related to the identification of commercial opportunities and working in interdisciplinary research environments. There are also significant differences between the various fields of science. In the top U.S. universities, the funding sources for scientists more likely to make inventions are more diversified and unique. The results for Finland are surprisingly similar, suggesting that the cause of the ‘European paradox’ seems to originate in the commercialization of inventions rather than their generation. When focusing on inventors who actively pursue commercial goals, both U.S. and Finnish inventors prefer licensing as the most popular way of taking scientific discoveries to the market. Consulting and entrepreneurship rank second and third, respectively. The countries differ with respect to both the inventors’ motivations to commercialize inventions and their reasons to refrain from it. In Finland, the motivations for not pursuing commercial opportunities are much
more prominent than among U.S. scientists.