Technological Innovation, Resource Allocation, and Growth

Abstract

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How does information technology improve aggregate productivity? A new channel of productivity dispersion and reallocation

“…Furthermore, we show that the cross-industry variation in reallocation effect explains substantial differences in the 5-year productivity growth rates of industries with similar levels of IT. This finding supplements recent papers emphasizing the reallocation effect in explaining long-run productivity growth (Foster et al, 2001(Foster et al, , 2006Acemoglu et al, 2012;Kogan et al, 2012). Information technology is an example of general purpose technology (GPT).…”

“…If IT increases the dispersion of productivity, we expect a reallocation of inputs as suggested in Kogan et al (2012). If cross-industry variation in the intensity of reallocation exits, we can expect higher long-run growth in industries with active reallocation, because those are the industries in which scarce resources are used by the most efficient firms.…”

“…However, we find that firms with higher productivity growth hire more workers during our sample period. Using a different measure of technology innovation, Kogan et al (2012) also find that more innovative firms in the U.S. hire more workers. See Section 2 for more discussion of this issue.…”

“…Supplementing these findings, Kogan et al (2012) show that the reallocation is triggered by the differing levels of technology innovation among firms by examining the relationship between their technology innovation measure and input demands using U.S. firmlevel data from Compustat. They measure firm-level innovation as the weighted average of patent where weight is defined as the stock price reaction when each patent is granted.…”

Did bank distress stifle innovation during the Great Depression?

“…Following Trajtenberg (1990), the idea of using citations to adjust patent counts for quality is common in the literature. Kogan, Papanikolaou, Seru, and Stoffman (2012) construct a useful alternative indicator of patent quality by looking at the stock market reaction to patents for the time period 1926 to 2010. Their measure is strongly correlated with citations.…”