Dario Guarascio

The dynamics of profits and wages: technology, offshoring and demand

ABSTRACT This article explores the impact of innovation, offshoring and demand on profits and wage dynamics. Empirical analysis is performed on a panel of 37 industries (1995–2010) across five European countries. Our identification strategy relies on instrumental variables and recently proposed heteroskedasticity-based instruments. Additionally, we perform sensitivity analysis to account for omitted variables bias. The main results of our study can be summed up in three points. First, it highlights the contrasting effects of R&D and offshoring as wage determinants. Second, it shows that external demand is a key variable driving profits growth. Third, the categorisation of workers according to skill level shows that high-skilled workers are favoured by both innovation and offshoring, offshoring exerts downward pressure primarily on low-skilled wages and profits are positively correlated with high-skill wages, negatively correlated with medium-skill wages and not correlated with low-skill wages.

Export, R&D and New Products

In this article we extend the model developed by Bogliacino and Pianta (2013a, 2013b) on the link between RD second, the role of innovation as a determinant of export market shares; third, the export success as a driver of new R&D efforts. The model is tested for 38 manufacturing and service sectors of six European countries over three time periods from 1995 to 2010. The model effectively accounts for the dynamics of R&D efforts, innovation and international performances of European industries. Moreover, important differences across countries emerge when we split our sample in a Northern group – Germany, the Netherlands and the United Kingdom – and a Southern group – France, Italy and Spain. We find that the ‘virtuous circle’ between innovation and competitiveness holds for Northern economies only, while Southern industries fail to translate innovation efforts into export success.

La crisi e le riforme del mercato del lavoro in Italia: un’analisi regionale del Jobs Act

This paper provides an analysis of the dynamics of the Italian labor market after the introduction of the Jobs Act analyzing, in particular, the regional dimension. In line with the evidence shown in Fana et al. (2016), we show that, after the Jobs Act, temporary employment increased more than permanent one. Moreover, it emerges as the slight increase in employment is significantly linked to the stabilization of existing contracts rather than the creation of new employment. The dynamics of employment at the regional level is characterized by a significant degree of heterogeneity. However, no specific regional patterns seems to emerge. The empirical analysis is based on data on the labor force (ISTAT) distinguished by regions and on administrative data (INPS) concerning the quantity, quality and duration of employment contracts.

The gains from technology: new products, exports and profits

ABSTRACT The introduction of new products, greater competitiveness-based export performances, and higher profits are three major benefits from technological change. We build on previous work that has identified ‘virtuous circles’ between R&D, innovation and profits in firms and industries [Bogliacino, F., and M. Pianta. 2013a. “Profits, R&D and Innovation: A Model and a Test.” Industrial and Corporate Change 22 (3): 649–678; Bogliacino, F., and M. Pianta. 2013b. “Innovation and Demand in Industry Dynamics. R&D, New products and Profits.” In Long Term Economic Development, edited by A. Pyka, and E. S. Andersen. Berlin: Springer., Bogliacino, F., M. Lucchese, L. Nascia, and M. Pianta. 2016a. “Modelling the Virtuous Circle of Innovation. A Test on Italian Firms” Industrial and Corporate Change. doi:10.1093/icc/dtw045.] and between R&D, innovation and exports [Guarascio, D., M. Pianta, M. Lucchese, and F. Bogliacino. 2015. “Business Cycles, Technology and Exports.” Economia Politica – Journal of Analytical and Institutional Economics 32 (2): 167–200; Guarascio, D., M. Pianta, and F. Bogliacino. 2016. “Export, R&D and New Products: A Model and a Test on European Industries.” Journal of Evolutionary Economics 26 (4): 869–905.]. We test a model – with a Three Stage Least Squares methodology – using data at the industry level – for 39 manufacturing and service industries – for 6 major EU economies – Germany, France, Italy, Spain, the Netherlands and the United Kingdom – over the period 1995–2011. Results confirm the presence of a ‘virtuous circle’ linking the gains from technology, and identify the specific role of additional variables and the presence of lags and feedbacks. Moreover, the relevance of differences between Northern and Southern European countries is examined, with separate estimations that shed new light on the heterogeneity of these relationships.

Where Does the Surplus Go?Disentangling the Capital-Labor Distributive Conflict

The evidence on growing inequality in OECD countries has raised an important debate over its main drivers, pointing out an increasing importance of capital-labour conflict. In this contribution, we aim at disentangling the role of some of the forces shaping this process. Our identification strategy relies on the sequential nature of wage setting and profits realization, in line with theoretical insights from the range theory of wages (postulating rents sharing at the shop floor level) and the principle of effective demand. In particular we focus on the role of technology and offshoring as instruments to create surplus and to shape the bargaining power of the parties involved in wage setting, and on different sources of demand as heterogeneous determinants of profits realization. The empirical analysis is performed on a panel of 38 manufacturing and service sectors over four time periods from 1995 to 2010, covering Germany, France, Italy, Spain, and United Kingdom. The contrasting effects of R&D and offshoring emerge as determinants of wages. Investment and internal demands are key variables in the realization of profits. When we look at the heterogeneity of the effects we see three main stylized facts. First of all, distinguishing for technological domain using Pavitt classes we can see that rents are effectively related with upgraded industries. Secondly, when we distinguish for the degree of openness we can see that, again, rents are mainly shared in open industries. Finally, when we disentangle the effect on wages per skill level, it is possible to confirm the intuition that offshoring hits the medium-low skill categories.