Innovation Job Market Papers 2024 (2/3)
Dozens of papers from new PhDs about innovation
(This is post #2 of 3)
In this special annual edition of What’s New Under the Sun, we have a big bundle of the titles, abstracts, and links to innovation-related PhD job market papers from 2024. Some were sent my way following my request in the last newsletter, but to find the majority of these, I looked at the titles of job market papers from graduating PhDs at ~175 economics, business, and other departments. Even so, I’m sure I missed some great papers. If that’s you, email me and I’ll add you to the posts.
I’ve split this post into three to make it a bit easier to navigate. This is the second post. The first post is here, and the last is here. Subscribers should receive all three in their email.
Titles Index
Titles are presented in random order. There might be additional authors on these papers - I’ve listed the associated job market candidate only.
Innovation Spurred: Evidence from South Korea's Big R&D Push by Luis F. Jaramillo
Firewall for Innovation by Jie Zhou
Unveiling the Hidden Risk Premium of Knowledge-Intensive Firms: Introducing the HKR Factor by Pedro Vallocci
Shifting Tastes, Advancing Technologies: A New Perspective on Income Inequality by Mila Markevych
How Patient is Venture Capital? by Namrata Narain
The Long-run Impacts of Ancient Chinese Civil Exams on Contemporary Local Innovation by Chenxi Tang
Exploring the Role of Social Media in the Diffusion of Economic Research by Yotam Sofer
Shifting Gears: Environmental Regulation in the Car Industry and Technological Change Among Suppliers by Johannes Gessner
Commercializing Contrarian Ideas: Evidence from AI Contests by Luca Gius
R&D Expenditures, Productivity, and Wage Inequality: Evidence from an R&D Tax Credit by Amirhossein Tavakoli
Innovation and Adoption in the presence of distortions by Álvaro Pinzón
Commission Fee Structure and Innovation in Digital Platforms by Byoungmin Yu
Customer capital and firm innovation by Duong Dang
Lock-In and Productive Innovations: Implications for Firm-to-Firm Innovation Pass-Through by Lucía Casal
Tariffs and Innovation in a Schumpeterian Economy with North-South Technology Transfer by Florence Ut Meng Ho
Mergers and Mismatches in the Labor Market for Creativity by Ke Shi
Combining Complements: Theory and Evidence from Cancer Treatment Innovation by Rebekah Dix
Lobbying, Innovation and Aggregate Productivity by Nasir Hossein Dad
From Research to Development: How Globalization Shapes Corporate Innovation by Chan Kim
Machine Versus Muscle, Bot Versus Brain: Effects of Artificial Intelligence on Heterogeneous Skill Groups by Wenjia Cao
Titles and Abstracts
21. Innovation Spurred: Evidence from South Korea's Big R&D Push
Luis F. Jaramillo
We study how South Korea’s first “mission-oriented” R&D program, implemented between 1992 and 2001, shaped innovation and economic outcomes. Using new textual data and a language model to identify targeted and control technological classes, we exploit the fact that some of the planned research projects were not implemented because of budget shocks. We use a local projections event study to compare the outcomes of targeted technological classes to those of control classes. Despite the absence of differential trends before the program, by ten years after the extension of program support, future-citation-weighed patenting output in the targeted classes doubled and real exports tripled relative to the control technology classes. These results stand when we study cross-country evidence. Technological classes with less concentrated patenting output before the program drive our results. Using market-based patent valuations, we find that the program’s benefits exceeded its costs by over a factor of three. Our findings suggest that technology policy was central to South Korea’s transition to a knowledge-intensive economy.
22. Firewall for Innovation
Jie Zhou
Do protectionist policies foster domestic growth and innovation in the digital economy, and if so, how? This paper investigates the impact of the Great Firewall (GFW) in China – the world's largest system of internet regulation – on the development of domestic mobile apps. By blocking foreign apps at times determined mostly by political considerations, the GFW prompted a 30% user base expansion for Chinese substitute apps (identified through their baseline text descriptions). Monthly data on these apps’ underlying technologies, extracted from their compiled source code, reveal that Chinese substitute apps accelerated their innovation efforts, with in-house development increasing by 14% two years after the blockage. This technological progress spilled over broadly post-blockage, as both domestic and foreign apps adopted more Chinese technologies. I further show that increased access to data was one important driver. Chinese apps requested more types of sensitive data and were more likely to share user data access with outside firms after their foreign substitutes were blocked. These increased types of user data generate innovation; quasi-random variation in the introduction of new data access raises in-house technology development. Finally, using data-sharing networks between app developers, I show that in-house development also increased at the firms that user data was shared with. In summary, protectionist policies brought about through China's GFW boosted its app industry, potentially contributing to China's leadership role in this fast-growing industry.
23. Unveiling the Hidden Risk Premium of Knowledge-Intensive Firms: Introducing the HKR Factor
Pedro Vallocci
This paper introduces a novel measure of knowledge capital risk derived from textual analysis of firms' 10-K filings. Using cosine similarity to R&D-related terms, I construct a High-Knowledge Risk (HKR) factor that captures firms' exposure to uncertainty from R&D outcomes. I demonstrate that the HKR factor offers significant explanatory power for cross-sectional equity returns, even after controlling for established equity pricing factors. This explanatory power persists in out-of-sample tests. Portfolios formed on HKR exhibit a substantial return premium, with high-HKR equities outperforming low-HKR equities over a 14-year period. A trading strategy based on the HKR factor also displays the highest Sharpe ratio among compared factors, indicating an attractive risk-adjusted return. These findings suggest that knowledge capital risk represents a distinct source of priced risk not fully captured by traditional asset pricing models and highlight the importance of knowledge capital risk in asset pricing.
24. Shifting Tastes, Advancing Technologies: A New Perspective on Income Inequality
Mila Markevych
This paper examines how changing consumer demand affects income inequality in the context of technological change in the US. I develop a general equilibrium structural transformation model that incorporates time-varying demand shifters –Temporal Demand Growth Factors (TGFs). The estimates of TGFs reveal significant heterogeneity in demand patterns across goods and households. Counterfactual analysis shows that TGF-driven demand effects substantially moderate the rise in income inequality due to technological change. In the absence of these demand effects, the increase in income inequality between 1989 and 2021 is 73% larger. Changes in demand particularly benefit workers in less productive and more labour intensive non-routine manual and routine cognitive sectors, consistent with Baumol’s cost disease. The reallocation of economic activity towards sectors with lower productivity growth, driven by changes in demand, is associated with more equitable income distribution, suggesting that demand driven slowdown in productivity growth is not necessarily detrimental to our economic wellbeing.
25. How Patient is Venture Capital?
Namrata Narain
Venture capital is a major source of finance for innovation in the U.S. economy, but how successful has it been in financing long-term innovation? I evaluate the allocation of venture capital to technologies, exploiting a new technology-level measure of the expected time between investment and innovation. Using natural language processing, I assign innovation funding between 1980-2022 from the following sources to technologies: venture capital firms, public companies, and six government programs and agencies. Venture capital is disproportionately allocated to technologies with short lags between investment and innovation; this allocation resembles that by public companies and is shorter-term relative to the distribution of commercial value. I show that the desire to raise follow-on funds (“fundraising pressure’’) leads venture capital fund managers to invest in innovation with short lags.
26. The Long-run Impacts of Ancient Chinese Civil Exams on Contemporary Local Innovation
Chenxi Tang
China was historically heavily influenced by civil exams (keju), with the exams focused on recruiting the best academic individuals to serve in government. This paper explores the relationship between prefectures with historically more top scorers on the national exam (jinshi) between 1371 and 1905 and contemporary innovation, measured as the number of top scientists and engineers and the number of patents and their quality, finding a strong positive relationship. Results are robust to using an instrumental variable strategy that measures the minimum river distance from each prefecture to the nearest pine and bamboo forest. A doubling of the number of historically top scorers on the national exam leads to a 33% increase in the number of top scientists and engineers and a 92% increase in the number of patents. Investments in military equipment and telegraph construction play crucial roles sustaining the long-term effects of China’s civil exams.
27. Exploring the Role of Social Media in the Diffusion of Economic Research
Yotam Sofer
For more than a decade, social media have become a key channel for knowledge dissemination used by scientists as a whole, and economists in particular. However, their role in the diffusion of knowledge is understudied. This article investigates the role of social media visibility of working papers on diffusion outcomes. While previous studies focused on the diffusion of STEM research, this article explores the diffusion of economic research. To do so, a data set of all NBER working papers published between 2015-2018, covering their social media mentions, as well as bibliometric and altmetric indicators, is used. To estimate the causal effect of social media visibility on diffusion, an instrumental variable approach, leveraging quasi-random variation in social media posting policy of the NBER's communication office, is employed. The results indicate heterogeneity in the role social media play in the diffusion of economic research. Increased social media visibility of working papers positively affects the likelihood and the extent to which research is diffused to public discourse (measured by blogs and news mentions), within the first year from publication, as well as within the scientific community (measured by academic citations), four years post-publication. No effect on citations in policy documents was found. Lastly, the likelihood to publish a working paper in a peer-reviewed journal is found to be unrelated to social media visibility of the working paper. The results of this article provide evidence for the role social media play in the diffusion of economic knowledge.
28. Shifting Gears: Environmental Regulation in the Car Industry and Technological Change Among Suppliers
Johannes Gessner
Decarbonizing industries to mitigate climate change requires technological change. Innovation by suppliers can play a crucial role in the technological transition, particularly when suppliers have expertise in zero-emission technologies. In this paper, I study the effect of environmental regulation in a downstream industry on the innovation outcomes of suppliers in the context of the European CO2 emission standard for passenger cars. I construct a novel data set that links administrative data on car manufacturer compliance to supplier patent data using information on automotive supply chains. To identify the causal effect of changes in the stringency of the emission standard, I leverage the heterogeneous exposure of automotive suppliers to changes in the composition of the European car market in the aftermath of the 2015 Volkswagen diesel scandal. Exposure to more stringent environmental regulation increases innovation for zero-emission vehicle technologies among existing suppliers. In addition, the likelihood that car manufacturers form new supply chain links to firms with expertise in technologies to reduce vehicle emissions increases in response to more stringent environmental regulation. These results suggest that environmental regulation induces economically significant technology spillovers to the regulated firms.
29. Commercializing Contrarian Ideas: Evidence from AI Contests
Luca Gius
This work builds on the notion that some ideas are not only distinctive, but also contrarian: pursued by few, and met with open skepticism by most. Such skepticism hinders contrarians from attracting resources but allows them to experiment openly without fear of immediate imitation. To investigate this dynamic, I leverage hundreds of Artificial Intelligence contests where researchers either employ popular, state-of-the-art methods or pursue alternative, contrarian approaches. These contests act as sudden “moments of clarity” that reveal which methods perform best. They allow researchers to attract resources for commercialization, but also potentially alert competitors of the opportunity. Through a difference-in-differences design, I find that when contrarian contestants win, they are up to 7× more likely to found startups, and their startups attract up to 3× higher venture capital valuations. This cannot be simply explained by the fact that contrarians are more likely to achieve breakthroughs; much of the advantage arises by winning close races. Instead, while close victories validate contrarian entrepreneurs and allow them to attract resources, mainstream researchers tend to adopt contrarian methods only when they conclusively outperform traditional approaches. This reluctance to build on contrarian ideas allows contrarians to leverage public demonstrations to attract resources without provoking immediate competition.
30. R&D Expenditures, Productivity, and Wage Inequality: Evidence from an R&D Tax Credit
Amirhossein Tavakoli
This paper examines the impact of R&D tax credits on between-firm and within-firm wage inequality. Leveraging a regression kink design and matched employer-employee tax records, I estimate a large and statistically significant increase in R&D expenditures. The results show that R&D-intensive firms respond to tax credits with substantial increases in R&D expenditures, leading to significant gains in profitability, productivity, and wages while non-R&D-intensive firms show minimal changes. These gains disproportionately benefit high-skill, older, and long-tenured workers, exacerbating wage inequality between and within firms. High-skill workers experience the largest earnings gains, with a 10 percent increase in generosity of the tax credits leading to a 1.6 percent rise in their annual earnings. In contrast, low-skill workers see no significant changes. These findings provide evidence of rent-sharing mechanisms and highlight the role of R&D tax credits in contributing to wage inequality.
31. Innovation and Adoption in the presence of distortions
Álvaro Pinzón
Factor misallocation significantly contributes to the productivity gap between developed and developing economies. This paper examines the dynamic misallocation of R&D resources in Colombia’s manufacturing sector using a unique dataset on firms with over 10 employees, capturing comprehensive firm-level details on productivity, R&D, and market distortions, allowing for a precise assessment of innovation dynamics in a developing economy. I document distortions and the link between productivity, R&D activity, and innovation. I develop and calibrate a model to the Colombian manufacturing industry, where firms face market distortions and invest in R&D to improve productivity. The results show that reducing distortions to U.S. levels leads to a 64% increase in aggregate TFP, with 34% of this growth driven by R&D reallocation and improved selection. Notably, R&D resources shift from low- to high-productivity firms, even as overall innovation rates remain almost constant.
32. Commission Fee Structure and Innovation in Digital Platforms
Byoungmin Yu
This paper quantifies the welfare effects of regulating commission fees in digital platforms, focusing on third-party app developers’ innovation and pricing decisions. I employ a comprehensive dataset of music apps within the Apple iOS store in the United States from October 2018 to February 2024 to estimate app users’ demand and app developers’ cost parameters. The paper reveals key findings with three policy counterfactual simulations where I sequentially solve for optimal innovation and pricing decisions. First, a cap on commission fees promotes innovative efforts by third-party app developers and improves social welfare. Second, when the platform adds a unit fee scheme under the fee cap, developers partly pass unit fees on to app users by increasing in-app purchase prices. Third, a hypothetical buy-out of a streaming app by the platform leads to a significant decrease in the innovative efforts and market share of the acquired app. Notably, welfare analysis without quality adjustment is predicted to underestimate the impact of fee cap on social welfare by 0.91% - 2.06% points compared to the full-stage model estimates. This research highlights the importance of considering quality changes along with price fluctuations when evaluating regulatory intervention in digital platforms.
33. Customer capital and firm innovation
Duong Dang
This paper studies the role of customer capital in driving firm innovation decisions and the resulting effects on aggregate productivity and concentration. I develop a step-by-step innovation model where households form deep habits in consumption. These habits form customer capital for firms: firms can decrease prices and increase production to build customer capital and raise future profits, at a potential loss to current profits. As the strength of habits increase, leader firms face higher and more inelastic demand while followers face lower demand. I show how these movements in demand result in an increase in innovation by leader firms relative to follower firms, leading to greater productivity dispersion and concentration. I find evidence for this effect in data on U.S. public firms: in sectors where outputs are more heavily consumed by older households—those with stronger habits—the most productive firms increase their R&D investment relative to others. I discipline the strength of habits in the model base on micro estimates of household evolution of consumption. I then use the model to quantify the effects of changes in aggregate customer capital arising from aging demographics. The model suggests that the shift toward older households between 1980 and 2019 accounts for 10%-35% of the observed trends in rising revenue productivity dispersion among firms, increasing market concentration, and higher aggregate markups. The model also highlights how customer capital influences the effectiveness of innovation policies: with customer capital, innovation subsidies have a significantly larger impact on concentration and markups—around two to three times greater than in an environment without customer capital.
34. Lock-In and Productive Innovations: Implications for Firm-to-Firm Innovation Pass-Through
Lucía Casal
Firms innovate to improve efficiency and reduce their costs of production (productive innovations) and to increase customer dependency by making products harder to substitute (lock-in innovations). In this paper, I quantitatively study the macroeconomic implications of lock-in innovations for aggregate productivity and market power. I develop a theoretical framework that allows firms to invest in lock-in innovations by reducing product substitutability, while also nesting standard macroeconomic models of productive innovations. A key prediction of the model is that productive innovations by suppliers increase customer firms’ sales by lowering input costs, while lock-in innovations decrease customer firms’ sales by allowing suppliers to charge higher prices for products that are harder to substitute. I use this theoretical insight to identify the nature of innovation in the data and calibrate the model to the U.S. economy. Informed by the observed changes in the response of customer firms’ sales to their suppliers’ innovations, I find that 37% of innovations are lock-in, and that their incidence has doubled in recent decades, especially for high markup firms. Moreover, had the incidence of lock-in innovations remained at pre-2000 levels, observed aggregate productivity would have been 3% higher, median markups would have stayed at pre-2000 levels, and markup dispersion would have been 9% lower.
35. Tariffs and Innovation in a Schumpeterian Economy with North-South Technology Transfer
Florence Ut Meng Ho
This paper develops a North-South quality-ladder model with northern innovative R&D, southern adaptive R&D and imitative R&D to analyze the effects of tariffs on innovation, technology transfer, relative wage and welfare. We find that increasing southern tariff decreases the relative wage between the North and the South permanently, increases the technology transfer rate permanently and decreases the northern innovation rate temporarily. In contrast, increasing northern tariff increases the relative wage permanently, decreases the technology transfer rate permanently and either increases or decreases the northern innovation rate, depending on the size of the North-South labor ratio. Moreover, we calibrate this model to the US-China data to perform a quantitative analysis. We find that imposing tariff in the home country yields welfare gain in itself and yields welfare loss in the foreign country. The numerical results are consistent with the analytical policy implications.
36. Mergers and Mismatches in the Labor Market for Creativity
Ke Shi
This paper introduces a novel empirical framework to assess the impact of ownership consolidation on labor markets, addressing growing concerns about labor market power. I develop a two-sided matching model tailored to the creative labor force, a segment characterized by strong worker-firm compatibility. Applying this model to a major merger in the U.S. publishing industry, I leverage rich text data to analyze its effects on the author labor market. Counterfactual merger simulations reveal a trade-off between efficiency gains, creative misalignment, and redistributive effects. While the merger alleviated capacity constraints, post-merger integration resulted in significant creative misalignment between authors and publishers. The merger also triggered substantial value transfers from competing publishers and authors to the merged entity, with established authors bearing the heaviest losses. Notably, the merger's anticompetitive effects manifested primarily in labor markets rather than consumer markets. This research extends merger evaluation beyond consumer impact, providing a framework for analyzing the broader consequences of mergers on labor markets characterized by worker-firm complementarities.
37. Combining Complements: Theory and Evidence from Cancer Treatment Innovation
Rebekah Dix
Innovations often combine several components to achieve outcomes greater than the “sum of the parts.” We argue that such combination innovations can introduce an understudied inefficiency—a positive market expansion externality that benefits the owners of the components. We demonstrate the importance of this externality in the market for pharmaceutical cancer treatments, where drug combination therapies have proven highly effective. Using data on clinical trial investments, we document several facts consistent with inefficiently low private innovation: firms are less likely than publicly funded researchers to trial combinations, firms are less likely to trial combinations including other firms’ drugs than those including their own drugs, and firms often wait to trial combinations including other firms’ drugs until those drugs experience generic entry. Using microdata on drug prices and utilization, we quantify the externalities that arise from new combinations and find that the market expansion externality often dominates the standard negative business stealing externality, suggesting too little innovation in combination therapies. As a result, firms may have incentives to free ride off others’ innovation, which we analyze with a dynamic structural model of innovation decisions. We use the model to design cost-effective policies that advance combination innovation. Redirecting publicly funded innovation toward combinations with high predicted market expansion or consumer surplus spillovers minimizes crowd out of private investments, increasing the rate of combination innovation and total welfare while remaining budget neutral.
38. Lobbying, Innovation and Aggregate Productivity
Nasir Hossein Dad
We study the impact of firms lobbying activities on innovation and aggregate productivity in the United States. We build a quantitative model where firms make decisions about lobbying and R&D investments to grow. Lobbying can either complement R&D by increasing its returns or substitute for R&D as an alternative way to boost profits, making the net effect theoretically ambiguous. To determine which effect dominates on average, we use firm-level lobbying data and a shift-share instrumental variable strategy to estimate the causal effect of lobbying on R&D expenditure. We find that lobbying significantly reduces R&D expenditure at the firm level. We calibrate the model to the U.S. economy and find that eliminating lobbying would lead to a 3.5% increase in aggregate productivity. The gains are primarily driven by improvement in firm-level productivity distribution, through an increase in firm-level innovation. We then use the model to evaluate the impacts of U.S. Senator Elizabeth Warren’s proposal to tax lobbying progressively and find that such a policy could increase aggregate productivity in the U.S. by 1.57%.
39. From Research to Development: How Globalization Shapes Corporate Innovation
Chan Kim
I show that globalization has shifted U.S. corporate innovation from scientific research to commercial development. Analyzing data from publicly traded firms, I find evidence that substantial tariff reductions at export destinations following the “Uruguay Round'' led U.S. firms focus on a narrower range of technologies, reducing their emphasis on scientific research. To explain these findings, I develop a multi-product firm model that distinguishes between research and development. Globalization—modeled as an expanded market size—reallocates profits toward products for which firms hold a competitive advantage. Consequently, firms increasingly focus their innovation efforts on core products, favoring development as it more effectively targets them. The model embeds a crucial welfare trade-off: while a greater focus on development increases high-productivity products, a stronger emphasis on research enhances the overall innovation efficiency of the economy through knowledge spillovers. Calibration to U.S. manufacturing firms shows that these innovation decisions double the productivity gains from globalization but reduce welfare gains. The welfare-maximizing policy suggests that research subsidies should exceed development subsidies, particularly after globalization, to offset the decline in research share.
40. Machine Versus Muscle, Bot Versus Brain: Effects of Artificial Intelligence on Heterogeneous Skill Groups
Wenjia Cao
This paper studies effects of artificial intelligence (AI) on employment and wages for heterogeneous skill groups in the U.S. by introducing and analyzing a task-based framework. I first categorize labor into four skill groups based on skill specializations: (1) abstract and AI-intensive; (2) abstract-intensive but not yet AI-related; (3) routine-intensive; and (4) manual-intensive. The demand for AI skills is then measured by matching phrases for AI-developing skills to descriptions of online job postings. I document a consistent upward trend in the share of AI postings for the high-skilled AI-complement group during my sampling period, 2012-21. There is a strong growth in both employment and wages for abstract and AI-intensive occupations associated with an increasing demand for AI skills, while abstract but not-yet-AI occupations have much smaller growth. Middle-skilled occupations experience wage declines associated with an increase in the standard deviation of the intensity that AI-developing skills are required for job tasks. Employment and wage gaps between abstract and AI-intensive occupations and other skill groups widen as the labor market favors workers with AI skills, consistent with my theoretical model's implications. I also discuss whether AI is possibly a general-purpose technology.
Innovation Job Market Papers 2024 continues here.