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Working Paper
Stablecoins: Growth Potential and Impact on Banking
Stablecoins have experienced tremendous growth in the past year, serving as a possible breakthrough innovation in the future of payments. In this paper, we discuss the current use cases and growth opportunities of stablecoins, and we analyze the potential for stablecoins to broadly impact the banking system. The impact of stablecoin adoption on traditional banking and credit provision can vary depending on the sources of inflow and the composition of stablecoin reserves. Among the various scenarios, a two-tiered banking system can both support stablecoin issuance and maintain traditional ...
Working Paper
Non-renewable resources, extraction technology, and endogenous growth
We document that global resource extraction has strongly increased with economic growth, while prices have exhibited stable trends for almost all major non-renewable resources from 1700 to 2018. Why have resources not become scarcer as suggested by standard economic theory? We develop a theory of extraction technology, geology and growth grounded in stylized facts. Rising resource demand incentivises firms to invest in new technology to increase their economically extractable reserves. Prices remain constant because increasing returns from the geological distribution of resources offset ...
Working Paper
The Paper Trail of Knowledge Spillovers: Evidence from Patent Interferences [REVISED]
REVISED 9/2019: We show evidence of localized knowledge spillovers using a new database of multiple invention from U.S. patent interferences terminated between 1998 and 2014. Patent interferences resulted when two or more independent parties simultaneously submitted identical claims of invention to the U.S. Patent Office. Following the idea that inventors of identical inventions share common knowledge inputs, interferences provide a new method for measuring spillovers of tacit knowledge compared with existing (and noisy) measures such as citation links. Using matched pairs of inventors to ...
Report
An Assignment Model of Knowledge Diffusion and Income Inequality
Randomness in individual discovery disperses productivities, whereas learning from others keeps productivities together. Long-run growth and persistent earnings inequality emerge when these two mechanisms for knowledge accumulation are combined. This paper considers an economy in which those with more useful knowledge can teach others, with competitive markets assigning students to teachers. In equilibrium, students with an ability to learn quickly are assigned to teachers with the most productive knowledge. This sorting on ability implies large differences in earnings distributions ...
Working Paper
Innovation, Deregulation, and the Life Cycle of a Financial Service Industry
This paper examines innovation, deregulation, and fi rm dynamics over the life cycle of the U.S. ATM and debit card industry. In doing so, we construct a dynamic equilibrium model to study how a major product innovation (introducing the new debit card function) interacted with banking deregulation drove the industry shakeout. Calibrating the model to a novel data set on ATM network entry,exit, size, and product offerings shows that our theory fits the quantitative pattern of the industry well. The model also allows us to conduct counterfactual analyses to evaluate the respective roles that ...
Report
The dual nature of trade: measuring its impact on imitation and growth
Imports of goods that embody foreign technology raise a country's output directly as inputs into production and indirectly through reverse-engineering of these goods, which contributes to domestic imitation and innovation. This paper first quantifies spillovers from high-technology imports from developed countries to domestic imitation and innovation in both developed and developing countries. It then considers the contribution of foreign and domestic innovation to real per capita GDP growth. ; International patent data for forty countries from 1970 to 1985 are used to create proxies for ...
Working Paper
DO NON-COMPETE COVENANTS INFLUENCE STATE STARTUP ACTIVITY? EVIDENCE FROM THE MICHIGAN EXPERIMENT
This paper examines how the enforceability of employee non compete agreements affects the entry of new establishments and jobs created by these new firms. We use a panel of startup activity for the U.S. states for the period 1977 to 2013. We exploit Michigan’s inadvertent policy reversal in 1985 that transformed the state from a non enforcing to an enforcing state as a quasinatural experiment to estimate the causal effect of enforcement on startup activity. In a difference-in-difference framework, we find little support for the widely held view that enforcement of non-compete agreements ...
Working Paper
Connecting to Power: Political Connections, Innovation, and Firm Dynamics
How do political connections affect firm dynamics, innovation, and creative destruction? To answer this question, we build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model generates a number of theoretical testable predictions and highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity. We test the predictions of our model using a brand-new dataset on Italian firms and their workers. Our dataset spans the ...
Journal Article
The Visible Hand: The Role of Government in China’s Long-Awaited Industrial Revolution
China is undergoing its long-awaited industrial revolution. There is no shortage of commentary and opinion on this dramatic period, but few have attempted to provide a coherent, in-depth, politicaleconomic framework that explains the fundamental mechanisms behind China?s rapid industrialization. This article reviews the New Stage Theory of economic development put forth by Wen (2016a). It illuminates the critical sequence of developmental stages since the reforms enacted by Deng Xiaoping in 1978: namely, small-scale commercialized agricultural production, proto-industrialization in the ...
Working Paper
Comparative Advantage in Innovation and Production
This paper develops a multi-country, general equilibrium, semi endogenous growth model of innovation and trade in which specialization in innovation and production are jointly determined. The distinctive element of the model is the ability of the agents to direct their research efforts to specific goods, in a context of heterogeneous innovation capabilities across countries and contemporaneous decreasing returns to R&D. The model features a two-way relationship between trade and technology absent in standard quantitative Ricardian trade models. I calibrate the model using a sample of 29 ...