Recent Research – four in brief

Several academic papers have been released recently focused on topics of importance for influencing the design and delivery of national and regional innovation policies. In this week’s issue of the SSTI Weekly Digest, we’ve included brief summaries of the findings of four of them related to timely news topics – the relationship of trade and manufacturing employments, the likely longer term economic impact of the 2017 corporate tax cuts, ties between R&D and trade,  and  the relationship of patents to employee wages.

Manufacturing and trade
The nation’s trade deficit grew by $600 million since 1980, about 3 percent of GDP.  U.S. manufacturing employment declined by more than 7 million positions over the same period. How much are the two related? A working paper from Robert Aliber of the University of Chicago’s Booth Business School presents the findings of his analysis in the no-suspense article in Capitalism and Society, Vol. 13: Issue 2, Article 4, The $600 Billion Increase in the U.S. Trade Deficit Since 1980 Has Led to the Loss of Three Million U.S. Manufacturing Jobs.

Minimal economic bump expected from 2017 Tax Cut
Another article from the second issue of the current volume of “Capitalism and Society” by Jason Furman of the Peterson Institute for International Economics at the Harvard Kennedy School revisits his previous analysis of the likely impact of the sharp decline in the corporate tax rate resulting from the 2017 tax cuts on annual growth of GDP.  The estimated annual growth rate of 0.02 to 0.04 percent for GDP over the next decade is discussed as likely to be even smaller or completely offset and negative because of the anticipated cost of increased payments to foreign financiers of the federal budget deficit resulting from the tax cut. See The 2017 Tax Law: A Boost to Growth or a Missed Opportunity?

Ties between R&D investment, exports, productivity and trade tariffs
A recent working paper looking at German firm-level data concludes “R&D investment leads to a higher rate of product and process innovation among exporting firms and these innovations have a larger impact on productivity improvement in export market sales. As a result, exporting firms have a higher payoff from R&D investment, invest in R&D more frequently than firms that only sell in the domestic market, and, subsequently, have higher rates of productivity growth.” The paper also found significant reductions in productivity and incentives to invest in R&D associated with the introduction of trade tariffs. See the NBER working paper Firm R&D Investment and Export Market Exposure.

Patent profits trickle up in innovative businesses
Some patents can induce significant increases in labor productivity, which historically is linked to increased wages for workers. But apparently, only for a select group within those firms, suggesting aggregated wage figures may be misleading measures of the relationship between innovation and wages.  “Patent allowances lead firms to increase employment, but entry wages and workforce composition are insensitive to patent decisions. On average, workers capture roughly 30 cents of every dollar of patent-induced surplus in higher earnings” and “these earnings effects are concentrated among men and workers in the top half of the earnings distribution.” These higher wages also correspond to “improvements in worker retention among these groups.” See NBER Working Paper Who Profits from Patents? Rent-Sharing at Innovative Firms.