Working Papers

*Supersedes 'Growth and Labor Reallocation: Vertical versus Horizontal Innovation' 

Abstract: 

This paper explores how growth and labor reallocation interact when producers innovate yet also face demand shocks. Incumbent producers drive long-run growth by improving existing products or expanding into new product markets, which increases employment. However, job creation stemming from demand shocks does not generate growth. Calibrating the model with German innovation survey data reveals that only 30% of incumbent job creation is attributable to innovation. Most growth originates from own-product improvements, which involve relatively modest labor reallocation. Ignoring demand shocks in the calibration overstates the role of product expansion while understating the impact of own-product improvements on growth. Moreover, the model indicates that slow population growth substantially affects growth and welfare through own-product improvements but has only a small impact on job creation.

*CESifo Working Paper N.11037. *'How Task-Biased is Capital-Embodied Innovation?'

Abstract: 

This paper develops an occupation-level measure of Capital-Embodied Innovation (CEI) by matching patents with capital goods based on their text similarity. The impact of CEI on labor demand is heterogeneous, depending on the similarity between capital and occupational tasks. Specifically, CEI associated with task-similar capital reduces the relative labor demand, whereas CEI related to task-dissimilar capital raises it. Between 1980 and 2015, abstract and non-routine occupations experienced more innovations in task-dissimilar capital and fewer in task-similar capital. CEI can explain a significant fraction of the task-biased labor market changes and the decline in labor share.

Abstract: 

This paper shows that faster worker turnover between employers encourages firms to choose disruptive technologies and accelerates long-run growth. In the US, metropolitan areas with more worker transitions across jobs have more disruptive innovation and faster productivity growth. Also, state-level institutional changes that increase employment-to-employment transitions of workers make innovations more disruptive in metropolitan areas. This paper reconciles these empirical facts with an endogenous growth model with a frictional labor market where firms choose the rate of technology upgrades and new technologies make existing worker skills obsolete. The calibrated model replicates the effect of worker turnover on disruptive innovation and suggests a substantial composition change of long-run growth in response to the changes in worker turnover rates.