A new paper from the FUCAPE Business School in Brazil, authored by Brazilian economist Bruno Funchal and Jadir Soares Junior, find that reductions of barriers to trade in the computer technology sector affected the Brazilian labor market. Specifically, they use the end of the “Informatics Law” in 1992 as the non-tariff barrier to trade of analysis. For eight years the “Informatics Law” imposed a limit on access by foreign companies to the manufacture of small computers and provided various support mechanisms for strictly nationally controlled companies.
Using data from the Annual Social Information Report and the Brazilian Occupational Classification, the authors compare the change in the demand for either “routine” or “non-routine” tasks before and after the repeal of the “Informatics Law” to the percentage of workers using computers in 2002 using a panel regression with fixed effects. The idea is that the liberalization of the technology market in Brazil led to a rise in the demand for workers doing non-routine tasks (considered complementary to computers) and a fall in the demand for workers doing routine tasks (considered a substitute to computers).
The authors find that industries and occupations intensive … Read the rest
University spinoffs more innovative, more successful than comparable firms
A new working paper by Swedish economist Andreas Stephan asks whether startups that were born as spinoffs from public universities are more innovative than similar, non-spinoff firms. Using a 2004 survey of East-German firms, Stephan compares the innovativeness of firms as measured by their patent applications and the originality of their patents. Even compared to firms of a similar age, industry, and location, the paper finds that university spinoffs do a better job of innovating.
The obvious lesson here for economic policy is that universities are studying useful things, and that we should have policies that encourage their transition from academic papers to real-world businesses. Business incubation has been on the U.S. national agenda for decades—since at least the passing of the 1980 Bayh-Dole Act—but there is much more that we can do.
For instance, Stephan finds that spinoff firms were more successful due to their collaboration, their proximity to universities, and their ability to get public research grant funding. All three of these traits are easy to translate into policy. Stephan also notes that even those firms that were … Read the rest
The current issue of the New York Review of Books features an article by Harvard economist Benjamin Friedman, “Brave New Capitalists’ Paradise’: The Jobs?” which is yet another reminder why we should not let economists make economic policy.
Freidman starts off by rightly pointing to the period from after WWII to the early 1970s as a golden era of low unemployment and high median income growth. He then rightly points to slower income growth over the last 20 years. His solution: less technology and lower productivity.
For Freidman has joined the ever growing neo-Luddite movement in America that mistakenly attributes our economic problems to too much technology and automation. He writes, “New technology that enhances the productivity of labor… means less labor input is needed to produce what was made before.” So far so good. But he goes on to write that “increasingly over the last quarter century, the balance [of less labor for existing goods plus more labor for new goods] indeed appears to have shifted [toward less labor].”
Why? Because “the pace of labor saving technological change has accelerated.” Okay, let’s stop here. First, of all productivity growth … Read the rest
On Monday, July 8, the Indian Prime Minister’s office, after consultations with India’s Department of Telecommunications and Department of Electronics, announced it would conduct a four-week review and reevaluation of the country’s controversial Preferential Market Access (PMA) mandate. The mandate imposed local content requirements on procurement of electronic products with “security implications for the country” by government and private sector entities. If the PMA had been implemented as originally envisioned, a specified share of each electronic product’s market—anywhere from 30 percent, rising possibly up to 100 percent by 2020—would have to be filled by India-based manufacturers, a requirement that could have eventually affected as much as half of the $50 billion spent annually on information and communications technology (ICT) products and services in India. In announcing the policy review, the Indian Prime Minister’s office acknowledged that, “Concerns have been raised in many quarters on different aspects of the PMA Policy, particularly relating to procurement by the private sector for electronic products with security implications.”
India conceived its PMA rules in an attempt to bolster domestic manufacturing of electronic products in India, a goal India has sought both to boost employment … Read the rest
Free trade is only successful if all sides are operating on a relatively level, market-based playing field. Unfortunately, in the last few years many nations, particularly developing ones, have dramatically ramped up their mercantilist policies designed to unfairly gain advantages in global trade. The use of these mercantilist policies hurts not only the aggrieved nations, but also, in certain cases, the aggressor. One tool in the mercantilist tool box is “dumping”: the practice of selling exports below the cost of production, often by relying on steep government subsidies. However, to date the system of addressing dumping claims has not been as effective as it should be. All too often by the time cases are brought to and adjudicated by the World Trade Organization (WTO) the damage has been done and many domestic firms put out of business.
We see this with the current conflict between the European Union (EU) and the United States with China over unfair Chinese trade policies in the solar industry. The chief issue for U.S. and EU policymakers concerns China’s use of mercantilist practices, especially selling below cost through large government subsidies, to promote Chinese solar … Read the rest
In the aftermath of the Boston Marathon bombing, we’ve seen a lot of discussion about the crucial role that the abundance of surveillance cameras and smartphones played in finding the suspects. The general consensus seems to be that these technologies were useful. For example, New York Mayor Michael Bloomberg said, “The Boston bombing is a terrible reminder of why we’ve made these investments—including camera technology that could help us deter an attack, or investigate and apprehend those involved.” And Chicago Mayor Rahm Emanuel similarly endorsed surveillance cameras when he said, “I will say, as I always have, because we have continued to put cameras throughout the city for security … purposes, they serve an important function for the city in providing the type of safety on a day-to-day basis—not just for big events like a marathon, but day-to-day purposes.”
Not surprisingly privacy advocates worry that such a high-profile display of the benefits of these camera systems will lead to more public acceptance and adoption, and so they are trying to minimize the value of these systems by arguing that this is a rare event. Jeff Chester, the executive director of … Read the rest
I had the opportunity to speak at the Bahrain International e-Government Forum this year—an annual conference which promotes the development of e-government in Bahrain. As part of the event, numerous Bahrain government agencies participated in an expo where they showcased their latest e-government services. One of the most impressive aspects of e-government in Bahrain is its successful deployment of electronic IDs.
I’ve written quite a bit about electronic ID systems in other countries, the benefits that they provide, and how the United States can more aggressively pursue this goal. The ability to securely identify users is a prerequisite to many e-government and e-commerce services, and the lack of a common identity platform raises costs for both the public and private sectors who must establish their own one-off systems for identification and authentication. Given how much the United States has been lagging on this technology, it was a real pleasure to have the opportunity to visit a country that has implemented an advanced electronic ID system.
I recently wrote about the potential impact on differential pricing caused by the Supreme Court decision in Kirtsaeng v. John Wiley and Sons which found that the first sale doctrine applies to copyrighted works lawfully made abroad. I noted in that article that since most digital goods are licensed, not sold, differential pricing is still possible for digital goods, but that licensing has had side effects, such as limiting the ability of consumers to resell their digital goods in the used goods market.
Generally, consumers are allowed to legally buy and sell used goods. For example, if you buy a music CD, you can listen to it as many times as you want and then, if you don’t plan to listen to it again and you haven’t made any copies, legally sell the CD. But the same isn’t true of digital goods that the consumer does not own but instead has only received a licensed to use.
For example, Amazon’s MP3 store license agreement includes the following restrictions:
“You must comply with all applicable copyright and other laws in your use of the Music Content. Except as set forth in
The Supreme Court ruled 6-3 this week in Kirtsaeng v. John Wiley and Sons in favor of Supap Kirtsaeng, a college student from Thailand who was challenging a copyright infringement charge for textbooks he bought overseas and resold in the United States. The publishers argued that the first-sale doctrine, which allows legally-acquired copyrighted works to be resold without the permission of the copyright owner, does not apply to goods made abroad. The heart of the case depended on the court’s interpretation of the meaning of the term “lawfully made.” Does it mean “made in the United States” (i.e. where Congress has jurisdiction) or “made according to copyright laws” (i.e. not a counterfeit copy)? Ultimately, the majority opinion rejected the geographical interpretation put forth by the publishers and found that the first sale doctrine applies to copies of copyrighted works lawfully made abroad.
The majority opinion acknowledged potential difficulties that could arise if it ruled in favor of the publishers, such as requiring libraries to get permission to lend books that were printed overseas or requiring owners of foreign-made cars to get permission from the copyright holders of the software in … Read the rest