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We test the hypothesis that information and communication technologies (ICT) polarize labor markets by increasing demand for the highly educated at the expense of the middle educated, with little effect on low-educated workers. Using data on the United States, Japan, and nine European countries from 1980 to 2004, we find that industries with faster ICT growth shifted demand from middle-educated workers to highly educated workers, consistent with ICT-based polarization. Trade openness is also associated with polarization, but this is not robust to controlling for R&D. Technologies account for up to a quarter of the growth in demand for highly educated workers.

We exploit changes in the area-specific eligibility criteria for a program to support jobs through investment subsidies. European rules determine whether an area is eligible for subsidies, and we construct instrumental variables for area eligibility based on parameters of these rule changes. Areas eligible for higher subsidies significantly increased jobs and reduced unemployment. A 10-percentage point increase in the maximum investment subsidy stimulates a 10 percent increase in manufacturing employment. This effect exists solely for small firms: large companies accept subsidies without increasing activity. There are positive effects on investment and employment for incumbent firms but not Total Factor Productivity.

We find that greater institutional ownership is associated with more innovation. To explore the mechanism, we contrast the \"lazy manager\" hypothesis with a model where institutional owners increase innovation incentives through reducing career risks. The evidence favors career concerns. First, we find complementarity between institutional ownership and product market competition, whereas the lazy manager hypothesis predicts substitution. Second, CEOs are less likely to be fired in the face of profit downturns when institutional ownership is higher. Finally, using instrumental variables, policy changes, and disaggregating by type of institutional owner, we argue that the effect of institutions on innovation is causal.

Guided by theories of “management by exception,” we study the impact of information and communication technology on worker and plant manager autonomy and span of control. The theory suggests that information technology is a decentralizing force, whereas communication technology is a centralizing force. Using a new data set of American and European manufacturing firms, we find indeed that better information technologies (enterprise resource planning (ERP) for plant managers and computer-assisted design/computer-assisted manufacturing for production workers) are associated with more autonomy and a wider span of control, whereas technologies that improve communication (like data intranets) decrease autonomy for workers and plant managers. Using instrumental variables (distance from ERP’s place of origin and heterogeneous telecommunication costs arising from regulation) strengthens our results. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.2013 . This paper was accepted by John List, behavioral economics .

The recent fall of labor's share of GDP in numerous countries is well-documented, but its causes are poorly understood. We sketch a “superstar firm” model where industries are increasingly characterized by “winner take most” competition, leading a small number of highly profitable (and low labor share) firms to command growing market share. Building on Autor et al. (2017), we evaluate and confirm two core claims of the superstar firm hypothesis: the concentration of sales among firms within industries has risen across much of the private sector; and industries with larger increases in concentration exhibit a larger decline in labor's share.

This paper shows that with (partial) irreversibility higher uncertainty reduces the responsiveness of investment to demand shocks. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed both numerically for a model with a rich mix of adjustment costs, time-varying uncertainty, and aggregation over investment decisions and time and also empirically for a panel of manufacturing firms. These \"cautionary effects\" of uncertainty are large--going from the lower quartile to the upper quartile of the uncertainty distribution typically halves the first year investment response to demand shocks. This implies the responsiveness of firms to any given policy stimulus may be much weaker in periods of high uncertainty, such as after the 1973 oil crisis and September 11, 2001.

What is the optimal form of firm organization during “bad times”? The greater turbulence following macro shocks may benefit decentralized firms because the value of local information increases (the “localist” view). On the other hand, the need to make tough decisions may favor centralized firms (the “centralist” view). Using two large micro datasets on decentralization in firms in ten OECD countries (WMS) and US establishments (MOPS administrative data), we find that firms that delegated more power from the central headquarters to local plant managers prior to the Great Recession outperformed their centralized counterparts in sectors that were hardest hit by the subsequent crisis (as measured by export growth and product durability). Results based on measures of turbulence based on product churn and stock market volatility provide further support to the localist view. This conclusion is robust to alternative explanations such as managerial fears of bankruptcy and changing coordination costs. Although decentralization will be suboptimal in many environments, it does appear to be beneficial for the average firm during bad times.

The impact of R&D on growth through spillovers has been a major topic of economic research over the last thirty years. A central problem in the literature is that firm performance is affected by two countervailing \"spillovers\" : a positive effect from technology (knowledge) spillovers and a negative business stealing effects from product market rivals. We develop a general framework incorporating these two types of spillovers and implement this model using measures of a firm's position in technology space and product market space. Using panel data on U.S. firms, we show that technology spillovers quantitatively dominate, so that the gross social returns to R&D are at least twice as high as the private returns. We identify the causal effect of R&D spillovers by using changes in federal and state tax incentives for R&D. We also find that smaller firms generate lower social returns to R&D because they operate more in technological niches. Finally, we detail the desirable properties of an ideal spillover measure and how existing approaches, including our new Mahalanobis measure, compare to these criteria.

Many writers have claimed that research and development (R&D) has two faces. In addition to the conventional role of stimulating innovation, R&D enhances technology transfer (absorptive capacity). We explore this idea empirically using a panel of industries across twelve OECD countries. We find R&D to be statistically and economically important in both technological catch-up and innovation. Human capital also plays an major role in productivity growth, but we only find a small effect of trade. In failing to take account of R&D-based absorptive capacity, existing U.S. -based studies may underestimate the return to R&D.

Using U.S. firm level panel data we simultaneously assess the contributions to productivity of three potential sources of research and development spillovers: geographic, technological, and product market (\"horizontal\"). To do so, we construct new measures of geographic proximity based on the distribution of a firm's inventor locations as well as its headquarters. We find that geographic location is important for productivity, as are technology (but not product) spillovers, and that both intra and inter—regional (counties) spillovers matter. The geographic location of a firm's researchers is more important than its headquarters. These benefits may be the reason why local policy makers compete so hard for the location of local R&D labs and high tech workers.