The importance of social capital/social innovation in macroeconomics

This paper contributes to the literature of social capital and social innovation by showing the relevance of social capital and innovation in macroeconomics. By referring to the economic analysis of social capital, we improve the understanding of social innovation and the mechanisms through which it impacts the economy. Furthermore country level estimates of social capital are generated based on the European Value Survey. These estimates can serve to gain deeper understanding in social innovation on country level.

Simulation Tests of the new Innovation Module of NEMESIS with ICT, R&D and Other Intangibles

Up to now, large scale applied economic models with endogenous growth have represented innovation, as the engine of long term growth, eihter as a consequence of human capital, which does not completely endogenized innovation, or as fruit of investments in R&D. Unfortunately, this approaoch limits the full endogenization of innovation to sectors that invest in R&D that is to say mainly to manufacturing sectors. In this framework, sectors which not invest in R&D were not considered as innovative sectors by nature in economic modelling and their apparent productivity growth were assumed to come from spillovers from innovative sectors. Nevertheless, recent empirical studies question this restriction and an emerging literature enlarges the range of innovative activities (e.g. Carlo, Hulten and Sichel, 2005 [10] and 2006 [11]). Another limitation of this approach comes from its unability to grasp the impact of the wide diffusion of Information and Communication Technologies (ICT thereafter) considered as an important source of performance improvement. This feature relies on the general purpose nature of these technologies (defined as General Purpose Technologies, GPT thereafter) inducing strong and large improvements in innovation capacities for users.
Therefore, in this context, a new theoretical framework has been developed for the innovation module of the NEMESIS model in order to take into account both the ICT investments as engine of growth and other innovative assets in addition to simple R&D investments.
The main purposes of these modifications consist (i) in considering innovative activities in a broader sense than pure R&D, by taking also into account expenditures in other intangibles assets, notably softwares and training, and (ii) in considering ICT as GPT, notably by including them in the innovation function in order to reflect their enabling feature. This is, at our knowledge, the first attempt of such improvement in a large scale macro-sectoral model1. The aim of this paper is to test the modifications of the innovation module that are reminded in the first part. In particular, it verifies whether these modifications question the previous policy assessments realised with the old version of NEMESIS or not. In addition, it tests whether this specification is in line with the theory and empirical observations, and highlights how such improvement enables to enrich the analysis of policies supporting innovations.

Targeted R&D subsidies: policy insights from SIMPATIC counterfactual analysis

When deciding on how to support private sector R&D policy makers need to compare different policies against each other. For the purposes of fostering such an analysis,SIMPATIC has performed a counterfactual analysis, providing insights into how different policies perform. We find that while there is little difference in terms of R&D participation, R&D investment, spillovers and welfare between the prevailing policy regimes and one of optimal R&D tax credits on the one hand, and between these activist policies and no government support on the other hand. We also find that the gap between these three policies and socially optimal (but unrealistic) policies is quite small at least as long as one only considers national policies.

Targeted R&D subsidies: policy insights from SIMPATIC structural modelling

In this paper, we summarize the main policy lessons from the SIMPATIC structural model. The model builds on us estimating firms’ decisions to 1) apply for subsidies; 2) to invest or not in R&D; and 3) how much to invest in R&D if they invest. These firm decisions are complemented by the analysis of the government’s decision as to how much to subsidize a given R&D project.

Allocation of R&D subsidies: policy insights from SIMPATIC

This paper summarizes the policy implications from a microeconometric analysis of how firms apply for R&D subsidies, and how governments grant them, using data from 5 EU countries. We find that public institutions supporting private R&D differ across countries and change over time. We also find that firm characteristics have little influence on government agencies’ R&D subsidy rate decisions

Effects of targeted R&D support: European evidence

This paper provides a project and firm-level analysis of the effects R&D subsidies have on private R&D investment. We use data from Finland, Flanders and Germany. We find that the effects of subsidies at the project level are not strong: We find complete crowding out or worse for all data sets. At the firm level, the results are very different: We find strong crowding in / additionality in Belgium and Finland and Flanders, and rowding out for Germany. At least for Finland and Flanders, the results should be interpreted with caution.

International comparison of the R&D subsidy allocation process: evidence from five European Union countries

In this paper, we update and summarize the results of the SIMPATIC e-book on the results from microeconometric analysis of how firms apply for R&D subsidies, and how governments grant them, using data from 5 EU countries. We find that older firms are less and larger firms mostly more likely to apply for subsidies; that labor productivity has a heterogenous effect, and that SMEs are more likely to apply in Finland and Germany and less likely to apply in the Netherlands. Firms in disadvantaged regions in Finland and Germany. Firm characteristics are mostly uncorrelated with the subsidy rate. We find a great deal of heterogeneity across countries. Firms in all other countries are more likely to apply given their characteristics than German firms despite the fact that they get smaller subsidy rates than German firms with same characteristics.

The importance of social capital/ social innovation in macro economics

The renewed European Social Agenda, which was adopted by the European Commission in June 2008, contains the directions to shape Europe’s response to new social challenges and phenomena. A stronger focus on the social dimension of Europe is of topical interest in the light of the global economic crisis and its consequences on society. Both the crisis and longstanding economic issues such as population ageing, rising inequalities and the switch to a green economy brought to light new needs and the awareness that institutions as they currently are seem incapable of dealing with the complexity of the challenges ahead. While putting innovation, entrepreneurship and the knowledge society at the core of the Lisbon strategy for growth and jobs resulted insufficient to cope with such societal challenges, the focus on the relatively new phenomenon (at least in its current scale) of social innovation can offer one way forward for policy makers.

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Social innovation: an overview

The renewed European Social Agenda, which was adopted by the European Commission in June 2008, contains the directions to shape Europe’s response to new social challenges and phenomena. A stronger focus on the social dimension of Europe is of topical interest in the light of the global economic crisis and its consequences on society. Both the crisis and longstanding economic issues such as population ageing, rising inequalities and the switch to a green economy brought to light new needs and the awareness that institutions as they currently are seem incapable of dealing with the complexity of the challenges ahead. While putting innovation, entrepreneurship and the knowledge society at the core of the Lisbon strategy for growth and jobs resulted insufficient to cope with such societal challenges, the focus on the relatively new phenomenon (at least in its current scale) of social innovation can offer one way forward for policy makers.

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Policy brief on clean innovation and growth

Are climate policies good or bad for growth? Many policy makers who are trying to implement such policies are promising positive growth effects not only in the long run of 50 to 100 years, when effective climate policies will help to mitigate the potentially catastrophic economic consequences of climate change, but also in the short run when such policies are primarily perceived as a cost burden on businesses.

Sustained growth of per capita income can only be achieved by continued innovation; i.e. by continuously coming up with ever more sophisticated ways to transform a limited set of resources into economic value. It is now well established that effective climate policies induce innovation in clean technologies that help to reduce greenhouse gas emissions (GHG). However, by making polluting activities less profitable, climate policies also reduce innovation activity in polluting technologies. For example, our previous research on the automotive industry has documented that an increase in fuel prices – which would also happen as a consequence of the introduction of carbon pricing – increases innovation related to electric, hybrid and hydrogen vehicles but depresses innovation related to the internal combustion engine. Therefore, the overall consequences of climate policies in terms of economic growth will be determined by the net effect of the increase in clean and the reduction in dirty innovation. Should we expect this effect to be positive? Clean technologies comprise of a range of new and relatively unexplored technology fields. This could imply that there are opportunities for large economic gains similar to the emergence of Information & Communications Technologies over the last 40 years.

However, this does not necessarily mean that climate policies will have a positive effect on growth. What matters for growth are not the overall economic gains between clean and dirty technologies but if there is a significant difference in the non-private economic returns. These non-private economic returns are what we refer to as innovation spillovers. An obvious example of such a spillover is Android-based smart phones. It was Apple that first launched the now dominant design of smart phones. However, other companies such as Google were also able to benefit from the original R&D investments undertaken by Apple by copying or improving the original design.