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Essays on Industrial Policy and Innovation in an Open Economy
Get PDFJust like people, industries have a lifecycle. My dissertation explores how trade and industrial policy affect innovation and welfare across the industry lifecycle—often called the ``product cycle.'' Recently, new frontier technologies such as artificial intelligence, robotics, and green energy technologies have been rapidly emerging in what Klaus Schwab has labelled the `Fourth Industrial Revolution' (\citealp{schwab2017fourth}). This dissertation suggests that by taking into account the industry lifecycle, policy can have a more significant impact on the welfare of not only the implementing country but also its counterparts, compared to a time when new industries have become well-established and mature.In the first chapter, I develop a simple open economy model that incorporates productivity dynamics suggested by the industry lifecycle. In this lifecycle, productivity is low and does not grow significantly in the early stage, then after a radical innovation, it grows very fast for a while before tapering off. The model suggests important policy implications. First, considering industry lifecycle when designing industrial policy is important since the growth potential and degree of externality vary depending on the stage of the targeted industry's lifecycle. Second, policymakers need to take into account the difference in timing when policy costs and benefits occur. The model shows that industrial policy reduces instantaneous utility in the short run due to distortions created by the policy, but it can increase overall welfare by accelerating innovation in the targeted industry in the long run. Third, home industrial policy can increase foreign welfare through the terms-of-trade effect, meaning the foreign country can benefit from the lower home product price due to home innovation.In the second chapter, I present a general framework for analyzing the welfare effects of industrial policy when a country is hastening to catch up to the technological frontier, versus racing to create new technologies. The model in this chapter, which incorporates industry lifecycle theory into an open economy macroeconomic model by \cite{corsetti2007}, provides distinct welfare implications in two scenarios: \emph{catch-up} and \emph{frontier technology races}. In the former scenario, the targeted industry is nascent with high growth potential at home, but mature abroad. In contrast, in the latter scenario, both the home and foreign industries have high growth potential and are in competition with each other. For the home country, a production subsidy accelerates innovation in the targeted industry and thus can enhance welfare in both scenarios, despite a trade-off between short-term losses and long-term gains. For the foreign country, in the catch-up scenario, a home production subsidy unambiguously increases foreign welfare. Conversely, in the scenario of frontier technology races, it may induce a beggar-thy-neighbor effect by delaying innovation abroad. In such circumstances, the foreign country responds by implementing aggressive countervailing policies to mitigate the negative spillover effects. If both countries instead cooperatively support the industry, the welfare outcome is a Pareto improvement compared to the Nash equilibrium.In the third chapter, I explore the reasons why many countries support industries essential for transitioning to a green economy, despite the cost of converting to green energy and the opportunities for free-riding on other countries' carbon abatement. By incorporating the negative externalities from greenhouse gas emissions into the open-economy macroeconomic model developed in Chapter \ref{ch:2ndChapterLabel}, I analyze the welfare effects of industrial policies that subsidize production of capital goods (like solar panels or wind turbines) used to produce green energy. The model predicts that a production subsidy for the green capital goods industry is desirable for the home country, as it accelerates innovation in the industry and consequently green energy adoption. This acceleration at home delays innovation abroad, generating a beggar-thy-neighbor effect, despite the environmental benefits from home innovation. Thus, in a Nash equilibrium, both nations competitively raise production subsidies, improving welfare in both countries by reducing distortions created by the subsidy and greenhouse gas emissions. A cooperative equilibrium still yields a Pareto improvement, given the incomplete resolution of the free-riding problem in the Nash equilibrium. To quantitatively analyze the welfare and environmental effects of policies implemented by the US and the EU, I estimate the innovation timing elasticity, showing for the first time that the pace of innovation increases with the number of firms operating in an industry. The estimate is sufficiently high to shift the optimal national policy from free-riding to subsidizing green capital goods production in the quantitative analysis
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Essays on Capital Goods Trade Policy and Technology Diffusion
Get PDFInvestment in capital goods is a key determinant of productivity and economic growth. At the same time, machinery production is more geographically concentrated than other manufactured goods and strongly correlated to the R&D intensity across countries. Therefore, international trade in capital goods is expected to increase countries' access to different technologies and to have a growth effect beyond the traditional allocative efficiency trade gains. This dissertation focuses on the effects from capital goods trade policy on firms performance, welfare and technology diffusion. The first chapter investigates the effect of a reduction in capital goods import tariff on firms' trade performance. To do so, I bring together rich data from Brazilian firms that imported capital goods in the last two decades. The empirical strategy compares the share of imports across firms that entered through a tariff exemption program and the firms' outcomes in the following years, using local projections estimates. The results point to a larger increase in exports, imports of inputs, number of destination countries and of export varieties for firms with larger shares of exempted capital goods imports. In order to address potential selection effect from program participation, I take a sub-sample of non-applicant firms, since the exemption, once approved, applies to all firms. I find very similar results. Regressions which instrument for the equipment imports further confirm the findings.
Chapter 2 studies the welfare effects of capital goods trade policy, using a quantitative general equilibrium framework with sector-specific trade elasticities and capital and intermediate inputs shares. I present an empirical implementation of the model and conduct counterfactual analyses regarding the capital equipment liberalization program in Brazil, employing data on world input-output flows and on the Brazilian sector-level labor. I first assess the welfare effects of gradual reductions in import tariffs up to complete liberalization. The results suggest welfare gains of up to 2%. Then I compare the impact from unilateral tariff reductions, and find that equipment imports from China would benefit Brazil the most. Finally, further removing trade costs leads to an even stronger increase in welfare.
While the first two essays focus on tariff policy, the third part of the dissertation explores foreign capital policy in the context of the diffusion of technologies embodied in capital goods. Chapter 3 studies technology diffusion and multinational spillovers by taking advantage of the trade in capital goods dataset that contains narrowly defined products, different from the previous literature. This allows me to identify the first firm to adopt a technology and to track subsequent adoptions. I find evidence of important spillovers from multinationals: they are importers of new technology, later followed by other firms, relatively more often than domestic firms. I also show that equipment of higher value, imported by multinationals and by larger firms, take longer to be diffused. Finally, I report that first adopters experience a very large increase in their export growth following the investment in capital (23 percentage points), while follower firms can still get a nontrivial benefit from the import too (6 percentage points). The gains for followers of multinationals are higher (10.7 percentage points) than the average of followers. These findings have important implications for foreign capital policy
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Essays on Trade and Industrial Policy within Production Networks
Get PDFThis is a critical moment to reexamine the role of trade and industrial policies in shaping economic outcomes. Even the most advanced economies, such as the United States, have begun to reconsider policy tools that were once deemed obsolete or suited only to developing countries. This dissertation seeks to understand how industrial and trade policies can work in practice-specifically, how they can be designed to serve different policy objectives which is not necessarily economic.In the first chapter, a joint work with Seungjin Baek, we assess optimal industrial policy factoring in external economies of scale under changing global market conditions. Since policy effects naturally materialize with a time lag, policy assessment should compare the short-run distortion of the intervention to its long-run gain. In this context, we expand the small open economy model of Bartelme et al. (2021) into a two-period dynamic setting to figure out how important the dynamics of global market conditions are in determining optimal policy. Optimal industrial policy in our model depends not only on the scale elasticity, but also on a multiplier which is larger when more resources are re-allocated to the industry in the long-run based on export market penetration. This optimal policy implies that an industry with a growing future market should receive stronger support than earlier papers suggest. We applied our analysis into the industrial policy of South Korea in the 1970s. We show that first, even though the scale elasticity of targeted industries does not dominate that of non-targeted industries, industrial policy increased the welfare of South Korea. Second, the suggested optimal subsidy rate for the targeted industries is even higher than the actual rate.In the second chapter, I propose a novel favoritism index, which captures the distributional effects of trade policies within an economy. The favoritism index does not rely on direct measurements of trade policies, which are often implicit and difficult to observe. Instead, I extend the political economy model of protectionism (Grossman and Helpman, 1994) into a multi-country, multi-industry general equilibrium model. I recover the welfare weight that trade policies and barriers implicitly assign to each industry, which is revealed through current trade flows. By leveraging detailed international input-output data, I compute the favoritism index for 44 industries, including service industries, across 76 countries over 20 years. Applying the index to the U.S. economy, I find that counties with a high favoritism index tend to exhibit lower volatility in employment and average wage. Furthermore, I find that counties which experienced a negative change in their favoritism index tend to lean toward the Republican Party, particularly since the 2016 Presidential Election. Lastly, I evaluate the trade policies of the past five administrations by examining changes in favoritism during each tenure, and detect a trade policy reversal during the Trump administration.In the third chapter, I investigate how supply and demand shocks interact in the context of production sharing, or the fragmentation of production processes (Hummels et al., 2001). I show that as production becomes increasingly fragmented and specialized across more stages, upstream sectors face greater exposure to demand shocks. This heightened exposure leads to greater concentration in those sectors, as only large firms can accommodate such shocks. This finding is consistent with the bullwhip effect, which documents higher output volatility in upstream sectors. I demonstrate that the upstreamness measure proposed by Antràs et al. (2012) serves as a sufficient statistic for demand shock exposure. Furthermore, I extend the framework of Gabaix (2011) by incorporating input-output linkages, showing how firm-specific shocks propagate to the aggregate level. The results imply that the shift toward greater fragmentation - enabled by declining communication and trade costs - may reduce resilience in upstream sectors, suggesting a role for policy in buffering shocks that originate there
Going Beyond Counting First Authors in Author Co-citation Analysis
Get PDFThe present study examines one of the fundamental aspects of author co-citation analysis (ACA) - the way co-citation
counts are defined. Co-citation counting provides the data on which all subsequent statistical analyses and mappings
are based, and we compare ACA results based on two different types of co-citation counting - the traditional type that
only counts the first one among a cited work's authors on the one hand and a non-traditional type that takes into
account the first 5 authors of a cited work on the other hand. Results indicate that the picture produced through this non-traditional author co-citation counting contains more coherent author groups and is therefore considerably clearer. However, this picture represents fewer specialties in the research field being studied than that produced through the traditional first-author co-citation counting when the same number of top-ranked authors is selected and analyzed. Reasons for these effects are discussed
Variations on the Author
Get PDF“Variations on the Author” discusses two of Eduardo Coutinho’s recent films (Um Dia na Vida, from 2010, and Últimas Conversas, posthumously released in 2015) and their contribution to the general question of documentary authorship. The director’s filmography is characterized by a consistent yet self-effacing form of authorial self-inscription: Coutinho often features as an interviewer that rather than express opinions propels discourses; an interviewer that is good at listening. This mode of self-inscription characterizes him as an author who is not expressive but who is nonetheless markedly present on the screen. In Um Dia na Vida, however, Coutinho is completely absent form the image, while Últimas Conversas, on the contrary, includes a confessional prologue that moves the director from the margins to the center of his films. This article examines the ways in which these works stand out in the filmography of a director who offers new insights into the notion of cinematic authorship
Appropriate Similarity Measures for Author Cocitation Analysis
Get PDFWe provide a number of new insights into the methodological discussion about author cocitation analysis. We first argue that the use of the Pearson correlation for measuring the similarity between authors’ cocitation profiles is not very satisfactory. We then discuss what kind of similarity measures may be used as an alternative to the Pearson correlation. We consider three similarity measures in particular. One is the well-known cosine. The other two similarity measures have not been used before in the bibliometric literature. Finally, we show by means of an example that our findings have a high practical relevance.information science;Pearson correlation;cosine;similarity measure;author cocitation analysis
Dispelling the Myths Behind First-author Citation Counts
Get PDFWe conducted a full-scale evaluative citation analysis study of scholars in the XML research field to explore just how different from each other author rankings resulting from different citation counting methods actually are, and to demonstrate the capability of emerging data and tools on the Web in supporting more realistic citation counting methods. Our results contest some common arguments for the continued
use of first-author citation counts in the evaluation of scholars, such as high correlations between author rankings by first-author citation counts and other citation
counting methods, and high costs of using more realistic citation counting methods that are not well-supported by the ISI databases. It is argued that increasingly available digital full text research papers make it possible for citation analysis studies to go beyond what the ISI databases have directly supported and to employ more
sophisticated methods
All Documents from Freedom of Information Act Request USTR_FY21-87
No full textThis material consists of
One file (Adobe pdf format) obtained as the final response to (consolidated) Freedom of Information Act Request USTR-FY21-87 from the Information Office of the United States Trade Representative, and
One printout (Adobe pdf format) of correspondence from the Office of the United States Trade Representative’s Information Office confirming receipt of the Freedom of Information Act request and announcing delivery of the final response.
Stamped page numbers have been added by Katheryn Russ to the top right-hand-corner of each page of the pdf file from the Information Office (Item 1 above) to allow for direct reference in research drawing on the documents. These have a lettered prefix to differentiate them from other page numbers assigned by the originators of the documents and the USTR Information Office.
The pdf file contains email correspondence between a number of private sector associations and the Office of the United States Trade Representative about issues related to the World Health Organization. These documents are cited in an article accepted for publication in the journal Global Health Governance: The Scholarly Journal for the New Health Security Paradigm (http://www.ghgj.org), titled "Corporate lobbying on US positions toward the World Health Organization: Evidence of intensification and cross-industry coordination," (Volume XII, No.1, Spring 2022) by Katheryn N. Russ, Phillip Baker, Manho Kang, and David McCoy.The research citing these documents was supported by funding from FHI 360/Alive & Thrive
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