Why do some advanced manufacturing clusters remain geographically persistent despite globalization and production fragmentation? Existing research explains industrial concentration through agglomeration economies or production dispersion through fragmentation and global value chains, but provides limited explanation for the persistence of capability-intensive activities. This paper develops a dynamic model of industrial location centered on capability reproduction. Regional production capabilities are conceptualized as productive coordination capacities reproduced through localized learning, repeated interaction, and inter-firm problem-solving. Capability accumulation simultaneously enhances productivity and increases relocation costs, generating endogenous relocation thresholds. The model produces path dependence, multiple long-run industrial configurations, and hysteresis, whereby temporary shocks may induce irreversible industrial restructuring. It also explains how fragmentation and persistence can coexist because capability-intensive activities remain selectively anchored while more modular activities become geographically mobile. Japanese semiconductor and automotive manufacturing are used as empirical illustrations. JEL codes R12, F23, L23
This study contributes to the growing literature that explores the influence of environmental policy on skill-biased employment across occupational groups. Specifically, we examine the causal effect of the revised Environmental Policy Stringency Index (EPS) and its components on skill-biased employment, focusing on occupations such as managers, professionals, technicians, and manual workers across 21 European economies from 2008 to 2020. Using the Method of Moments Quantile Regression (MMQR), we find that stringent environmental policies affect employment shares across different occupational categories. Skilled workers tend to benefit more from such policies, with a notable increase in the employment share of professionals across all policy measures and more heterogeneous effects among technicians and managers. In contrast, manual workers are generally adversely affected by environmental policies. These asymmetric effects on occupations exacerbate labour market inequalities, including disparities in employment levels and potential earnings.
In this study, we employ time series techniques to estimate the aggregate production function for China. Combined with labor force input with or without quality adjustment, the three estimated capital stock series then formed six groups of time series data. Using Chinese aggregate time series from the period of 1952-2024, unit root tests and tests of cointegration are performed for the variables involved. Both Structural Vector Auto Regression (SVAR) and State Space models are used to estimate the parameters of China’s aggregate production function. The estimated long-run output elasticity supports the view that there has been a slowdown in productivity growth under the conditions of labor quality adjustment in recent years in the aggregate Chinese economy, together with diminishing returns to scale in factor inputs.
Economic literature identifies innovation as a primary driver of productivity and GDP, with effects extending across borders via inter-regional spillovers. However, the role of territorial characteristics in shaping this transmission remains under-explored. Using spatial econometric techniques, we evaluate the intra-regional (internal) and inter-regional (external) impacts of European innovation through two approaches: the composite Regional Innovation Scoreboard (RIS) and a disaggregated framework of innovative milieu variables. Our results reveal an asymmetric spatial pattern: the RIS is associated with negative internal effects on productivity and GDP but generates positive spillovers for neighbouring regions. This suggests that local returns may be limited by short-run adjustment costs or absorptive capacity constraints, even as benefits diffuse spatially. These findings emphasise that innovation strategies may not be fully internalised locally, highlighting the necessity for place-sensitive policies that account for spatial dependencies.
The European Union’s fiscal policy framework imposes constraints on individual countries’ fiscal policies to ensure long-term financial sustainability. However, it is also designed to provide flexibility through the operation of “off-balance” automatic stabilisers. In practice, these rules have led to pro-cyclical measures in EU peripheral countries due to the way European institutions estimate the Non-Accelerating Wage Rate of Unemployment (NAWRU). The paper demonstrates the procyclical nature of the current mechanism by combining empirical evidence covering the period 2002-2023 with a semi-analytical model of the potential output and NAWRU dynamics to estimate the change in the Cyclical Component due to the endogenisation of the variables relevant to the business cycle. Since the recent reform of the Stability and Growth Pact has maintained the core of this mechanism, the challenges identified for the period 2002–2023 are likely to persist in the upcoming years as well.
The widespread adoption of online recruitment is profoundly reshaping the bargaining power and matching mechanisms between workers and firms, with significant implications for labor allocation. This paper investigates the impacts and mechanisms of information technology (IT) on labor misallocation from the perspective of search and matching frictions in the labor market. First, we develop a general equilibrium framework based on a search and matching model that incorporates firm productivity heterogeneity and worker skill heterogeneity, analyzing how IT alleviates labor misallocation by mitigating frictions. Second, empirical results show that IT penetration significantly reduces labor misallocation. Mechanism analysis indicates that IT penetration effectively alleviates labor misallocation by lowering search costs and improving matching efficiency for workers with different skill levels, thereby enhancing targeted matching. Third, heterogeneity analysis shows that the mitigating effect of IT penetration on labor misallocation is more pronounced in non-state-owned, non-exporting, capital-intensive firms, and those in less competitive industries.
Cobalt, lithium, and nickel are critical minerals indispensable to the lithium-ion battery (LIB) industry. Previous research has often analyzed these minerals’ supply networks based solely on trade volume, overlooking the structural factors that influence these networks. Addressing this gap, this study constructs dependency-based supply networks for these three minerals by employing pointwise mutual information. Furthermore, we investigate the evolutionary determinants of these networks using a Temporal Exponential Random Graph Model (TERGM). Our empirical findings reveal a pronounced core-periphery structure across all three mineral networks. Although community interconnectedness has intensified over time, geopolitical shocks, specifically the U.S.–China trade war, have triggered a significant redirection of trade flows away from traditional core hubs. TERGM analysis indicates that network evolution is jointly driven by endogenous structural effects, node-level country attributes, exogenous network influences, and temporal dependencies. Ultimately, the global supply networks for these critical minerals demonstrate synergistic changes and maintained robust stability.
This study examines the effects of fiscal consolidation on income inequality in OECD countries from 1978 to 2014, using narrative data. Employing local projections methodology and using a Gini decomposition interpretation, we estimate the impact of austerity episodes on disposable income, market income, wage, and functional inequalities. While the literature has primarily focused on the overall effect of fiscal consolidation on disposable income inequality, this paper examines how different dimensions of inequality respond to fiscal consolidation episodes. We find an increase in wage inequality in the short and medium runs, and a decrease in labor's share of income in the short run. The results also underscore the importance of social protection in the short term. Additionally, we observe a significant increase in earnings inequality, when including the lower end of the distribution. Finally, spending-based austerity measures are, in general, more relevant than tax-based ones. Results are robust to several tests.
Generative AI is reshaping what artificial intelligence can do in the workplace, calling into question pre-GenAI assessments of which workers and tasks are most exposed. In this paper we trace the evolution of AI exposure in the European labour market from 2008 to 2024 by linking 352 AI benchmarks to 14 cognitive abilities, 108 work tasks and 127 ISCO-3 occupations, weighting benchmarks by their research intensity in the AI literature and thus deriving AI exposure by cognitive ability. Bundling work tasks into occupations based on intensity indicators, we explore occupational exposure to AI. We find that the cognitive abilities most exposed to the recent surge of AI research are ideas-related, such as attention and search, comprehension and expression and logical reasoning. Because the associated information processing and problem-solving tasks are the most transversal across occupations, we find a steep increase in AI exposure across all occupational categories of workers, even though comparatively high-skilled occupations are more exposed than elementary occupations. This points at a substantial and transversal labour market impact of AI.
Strikes have received decreasing attention in both academic and public debate, in line with the neoliberal transformation of industrial relations and increasing competition in the globalised economy. This paper investigates whether strikes can play a role in determining workers’ incomes. To this end, we conduct a dynamic panel data analysis based on an error-correction model and covering 14 Western European countries over the period 1971–2019. The analysis examines the relationship between strikes and both the wage share and real wage growth. Despite the institutional differences among the countries included in the sample, the results reveal a positive long-run relationship between the variables. This relationship remains robust after controlling for inflation, real GDP, unemployment, trade union density, and other variables capturing broader changes in the structure of production and in workers’ bargaining power. These findings support the conclusion that channelling the social conflict toward strikes can produce positive outcomes for workers, therefore contrasting the prevailing view that wage claims produce an increase in inflation or unemployment and detrimental effects on workers’ income.
In the digital age, the emergence of digital commons has brought about unprecedented transformations in open innovation. Digital communities have provided more space for ordinary people to participate in innovation, thus blurring the boundaries between individual-driven distributed innovation and firm-led open innovation. This poses a challenge to the existing organizational framework of open innovation. Drawing on an in-depth case study of the Linux Foundation, we study how open innovation is organized and governed in digital commons. we integrate commons theory with open innovation research by introducing the concept of digital commons based open innovation(DCOI) and develop a conceptual framework to explain its governance mechanisms. Our findings show that digital commons support open innovation through three interrelated mechanisms, including resource pooling, innovation platform provision, and innovation service support, all of which are coordinated through a polycentric governance structure. Together, these mechanisms reduce search, coordination, and enforcement costs, broaden participation in innovation, and strengthen collaborative value creation. Our study contributes to the literature on open innovation and the commons theory by exploring wide-ranging and large-scale collaboration in open innovation in the digital age.
This paper analyses green jobs in Portugal using a framework based on occupations, tasks, and skills. Using linked employer and employee data for 2010 to 2019, we compare prevalence, sectoral patterns, and wage effects of green employment across definitions. Green jobs account for 2 to 14 percent of employment and show distinct sectoral patterns throughout the economy. Results show positive wage compensation for green job changers. We find gender and education gaps: men and highly educated workers are more likely to hold green jobs. Decompositions also show that a substantial share of the green wage gap is unexplained by observables, especially for task– and occupation–based measures. Overall, measurement choices shape conclusions about green employment and labour market returns. The results support a multidimensional approach to policy, training, and workforce adaptation in the green transition.
This paper provides a comprehensive evaluation of technical indicators in exchange rate forecasting by leveraging sequential architectures and demonstrating the adaptive capacity of LSTM in the presence of structural breaks. We show that the long short-term memory (LSTM) approach, when combined with technical indicators, exhibits stronger out-of-sample forecasting performance for five extensively traded currencies compared to using individual technical indicators or their combination. Our results also highlight that distinct technical indicators have varying effects on exchange rate forecasting in different countries. Additionally, we observe that the predictability is higher with high sentiment levels for Japanese yen and Swiss franc, and it generally strengthens across various currencies during recessions. We validate the robustness and persistent predictive power of the LSTM when integrated with technical indicators. This performance remains consistent across diverse model specifications and is robust to structural breaks.
GDP, income, and employment are commonly identified as sources of climate vulnerability. Given the context of globalization, comparative advantages constitute an additional source of climate vulnerability. This paper proposes a replicable assessment of the exposure and sensitivity dimensions of climate vulnerability through the short-run negative impacts of weather anomalies on comparative advantages in the Global South. Weather anomalies are defined as annual deviations from long-term values in temperature and precipitation. Comparative advantages are measured using enhanced Revealed Comparative Advantage (RCA) indexes based on trade and GDP patterns. RCA indexes and weather anomalies are combined into dynamic panel data models that control for structural and time-varying factors. Estimation relies on a two-step bias-corrected method of moments. Based on a sample of multiple products and countries in 1995-2021, findings show that climate vulnerability affects products beyond agriculture and countries beyond tropical regions, informing product-specific and country-level adaptation strategies in the Global South.
Why do some firms experience more volatile growth rates than others? This paper seeks to shed light on this question using a rich data set of almost 92,000 Vietnamese firms for the period 2009–2018. Apart from firm-level characteristics, the paper examines the roles of province-level financial development, corruption control, and their interaction in explaining firm growth volatility. Our results show that there is a robust negative correlation between corruption control and firm-level volatility. Moreover, while local financial development — measured by financial depth — is generally negatively associated with volatility, the correlation between financial outreach and different measures of firm growth volatility varies. Crucially, we find a negative interaction between corruption control and local financial development, suggesting that financial development may exert a more substantial volatility-dampening effect in environments with robust corruption control, and conversely, that the effect of corruption control may be stronger in provinces with advanced level of financial development.
This paper constructs measures of bilateral global value chain (GVC) network connectivity at the country pair-industry level based on the Wang et al. (2013) method for measuring domestic value-added trade. We analyze how deepening free trade agreements (FTAs) affects bilateral GVC network connectivity. Our main findings are as follows. First, deeper FTAs boost GVC network connectivity between country pairs, suggesting FTAs serve as 'building blocks' to global free trade. Second, deep FTAs promote GVC connectivity by mitigating political and institutional risks and enhancing resource control capabilities. Third, the positive effect is particularly pronounced in manufacturing, among intra-regional FTAs, and during the post-crisis period. Additionally, the deepening of existing FTAs has a stronger effect on GVC network connectivity than the initial signing of new FTAs. Further analysis suggests that country-pair-level variation in FTAs plays an important role in boosting bilateral GVC network connectivity.
