Stein Østbye

Is small firm gardening good for local economic growth

Based on panel data for the manufacturing and retail industries in a sample of 2645 US counties spanning the last two decades of the twentieth century, we find that firm size matters for industry growth. Contrary to previous research, our results suggest that there is a positive linkage between the average size of manufacturing and retail firms on the one hand and industry growth on the other. Our results are consistent with a Schumpeterian growth model, where bigger firms are needed to carry out effective Research and Development, leading to higher growth. The results, therefore, do not support the idea of small firm gardening as a local development strategy.

The competition–innovation debate: is R&D cooperation the answer?

Firms’ investment in research and development (R&D) depends on both product market competition and R&D cooperation. In this paper, we use a simple duopoly model of product innovation to show that firms should choose to enter into different cooperative R&D arrangements depending on competition. Equilibrium behavior implies different competition–innovation relationships conditional on the nature of the cooperative arrangements that firms join. Therefore, variation in the set of feasible modes of cooperation may explain why different competition–innovation relationships are observed in empirical studies based on field data. Experimental evidence confirms the presence of similar incentives for cooperating despite some deviations from predicted values of R&D.

A real options approach to investment in factor demand models

A real options approach to investment is used to derive a new full static equilibrium condition for capital within the framework of a restricted variable cost function. Empirical evidence suggests that the use of the traditional equilibrium condition may be grossly misleading.

Industrial structure, regional productivity and convergence : the case of Norway and Sweden

Are less productive regions catching up with more productive regions? In this paper we investigate the importance of regional industry structure for regional productivity convergence. We use county data for the Scandinavian Peninsula. Norway and Sweden are similar in many respects and the Scandinavian Peninsula therefore represents an attractive natural laboratory with one country inside and another outside the European Union. The data cover five-year intervals from 1980 to 2000 for Norway and from 1985 for Sweden. We find strong productivity convergence between Norwegian counties and weak divergence between Swedish ones. The effect of the industry structure on the spatial distribution of productivity appears to be small in magnitude, but it is qualitatively important. Moreover, the role played by the changing composition of production in the process of economic growth seems to differ over time. By implication, considerable caution should be exercised when undertaking convergence studies based on the commonly used one-sector growth model. More complex models allowing for differences in industry structure, and possibly also other potentially important factors such as wealth effects and transitional dynamics, should be considered.

The creative class: do jobs follow people or do people follow jobs?

ABSTRACT Regional adjustment models are applied to explore causal interaction between two types of people distinguished by educational attainment, and two types of jobs: creative class jobs and other jobs. Data used are for labour market regions in Finland, Norway and Sweden from the 2000s. Creative class jobs follow people with high educational attainment (one way causation), but creative class jobs also follow other jobs and vice versa (circular causation). The results suggest that stimulating creative class job growth could be accomplished through attracting people with higher education, but also by attracting other jobs with the added benefit that the initial stimulus would be reinforced through circular and cumulative causation between job creation in the two sectors.

Another note on Oswald's ‘The Economic Theory of Trade Unions’

The purpose of this note is to emphasize that the qualitative effect of a labour subsidy on the unions desired wage rate, is highly sensitive to the design of the policy instrument.