Productivity and Innovation

Yuriy Gorodnichenko, Jan Svejnar, 26 September 2015

While there is substantial evidence that multinationals are more productive than domestic firms, the evidence on productivity spillovers remains mixed. This column estimates the effects of foreign presence on the innovation of local firms. It suggests that spillovers from foreign firms to domestic firms are limited to domestic firms immediately connected to foreign firms. Requirements for foreign firms to have significant local content may therefore be justified.

David McKenzie, Christopher Woodruff, 21 September 2015

Better management practices are associated with better firm performance, and the quality of management practices is also associated with per capita income. This column explores the effect of business practices on small firms in developing countries. The findings indicate that better business practices are correlated with higher productivity, higher firm profits, and higher rates of survival. Poor business practices are holding back small firms in developing countries.

Paul Gaggl, Greg C. Wright, 20 August 2015

Investments in ICT could affect different types of workers within the firm in a different way. This column shows that firms that invest in ICT reorganise their production processes in a way to raise the productivity of workers who perform complex, cognitive-intensive works. This ICT investment and firm reorganisation has little effect on other types of workers.

Nicholas Crafts, Alex Klein, 30 July 2015

There is increasing evidence that cities offer externalities that raise labour productivity. This column looks at the contribution of US cities to productivity growth at the turn of last century. The findings show that increased specialisation, promoted by improved transportation, was the key to productivity growth. Today’s policymakers should heed this lesson.

Philippe Aghion, Ufuk Akcigit, Antonin Bergeaud, Richard Blundell, David Hemous, 28 July 2015

In recent decades, there has been an accelerated increase in top income inequality, particularly in developed countries. This column argues that innovation partly accounts for the surge in top income inequality and fosters social mobility. In particular, the positive effect of innovation on social mobility is due to new innovators.

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