Periodic Reporting for period 3 - GROWINPRO (Growth Welfare Innovation Productivity)
Okres sprawozdawczy: 2021-07-01 do 2022-06-30
Europe has experienced two decades of substantial decline in both productivity and income growth rates further decreased by the Great Recession in 2009. Such prolonged phase of relative stagnation may have dramatic long-run consequences on European welfare and living standards, especially considering the societal challenge of climate change. Moreover, globalization may well exacerbate the perverse effects of the low-growth regime on income distribution and inequalities.
The GROWINPRO project investigates the drivers of the European productivity slowdown and proposes an integrated policy toolkit to escape the low-growth trap while addressing key societal challenges. In doing so, the project provides an extensive analysis at the micro-, meso- and macro-levels of the possible relations between science, technology, and innovation, as well as their interactions with the changing patterns of demand and income distribution. The research has taken into account the dramatic social and economic consequences of the COVID-19 pandemic.
The GROWINPRO project investigates the drivers of the European productivity slowdown and proposes an integrated policy toolkit to escape the low-growth trap while addressing key societal challenges. In doing so, the project provides an extensive analysis at the micro-, meso- and macro-levels of the possible relations between science, technology, and innovation, as well as their interactions with the changing patterns of demand and income distribution. The research has taken into account the dramatic social and economic consequences of the COVID-19 pandemic.
Informed by fresh empirical analyses, a new generation of models has been developed to test the effectiveness of alternative policies in promoting an inclusive and welfare-enhancing growth, resilient to climate change. Different combinations of macroeconomic and industrial policies have been studied with a focus on the role of mission-oriented programs. Online, user-friendly versions of the models have been released on the project’s website (https://models.growinpro.eu). Here policymakers, stakeholders, and citizens can test the impact of different policy combinations on macroeconomic variables.
Overall results have been condensed in the policy brief “The GROWINPRO Policy Package for Unleashing Sustainable and Inclusive Growth in the European Union” (http://www.growinpro.eu/the-growinpro-policy-package-for-unleashing-sustainable-and-inclusive-growth-in-the-european-union-2/).
Main results:
- Do digital technologies represent a new industrial revolution? Not really, the so-called IV-Industrial Revolution shows a lot of elements of continuity with the ICT trajectories.
- What are new patterns of structural change? Past decades were characterised by the rise of the service sector, but even if manufacturing shares are declining, manufacturing productivity growth has the highest contributions to aggregate productivity growth. Such servitization is further accentuated by digitalisation in the manufacturing sector and is negatively impacting upon the labour share along the global value chain.
- What are the sources of new knowledge? Evidence of a worrying neglect of curiosity-driven scientific search in favour of more marketable applied projects, while private firms tend to do less basic research. Tighter appropriation via IPR increases rents, but has ambiguous (possibly negative) effects upon the rates of innovation, as revealed by the paradigmatic example of the development of COVID vaccines.
- What are the sources of productivity growth? The slow productivity growth in Europe is partly explained by a “prolonged creative destruction process” with slow business entry and exit dynamics. Moreover, the weakening of unions and wider dispersion of wages allow “laggard”/low-productivity firms to survive. Servitization is observed as a general tendency, but unrelated to sectoral productivity and employment growth.
- What are the sources of inequalities? Together with a decrease in the labour share, wage inequality is related to an incomplete pass-through of productivity gains to wages, which can be explained by the weakening of institutions aimed at workers ‘protection. Technology adoption does not seem to play a role in wage inequalities within firms. Conversely, the casualization of work, populated by information-based “winner takes almost all” firms, creates new (atypical) form of labour relations that threaten workers’ rights and wages.
- Does technological change lead to unemployment? The ultimate impacts depend on labour market regimes, income distribution and overall demand level, whereby a tighter regulation of the labour market akin to those in place in the sixties protects the economic system from technological unemployment.
Results have been constantly disseminated through various channels: the website, where all the outcomes of the research activity are collected; the social networks (Facebook, Twitter, LinkedIn); videos and infographics presenting the major findings; the participation and organisation of meetings and events; the project newsletter. Details on www.growinpro.eu
Overall results have been condensed in the policy brief “The GROWINPRO Policy Package for Unleashing Sustainable and Inclusive Growth in the European Union” (http://www.growinpro.eu/the-growinpro-policy-package-for-unleashing-sustainable-and-inclusive-growth-in-the-european-union-2/).
Main results:
- Do digital technologies represent a new industrial revolution? Not really, the so-called IV-Industrial Revolution shows a lot of elements of continuity with the ICT trajectories.
- What are new patterns of structural change? Past decades were characterised by the rise of the service sector, but even if manufacturing shares are declining, manufacturing productivity growth has the highest contributions to aggregate productivity growth. Such servitization is further accentuated by digitalisation in the manufacturing sector and is negatively impacting upon the labour share along the global value chain.
- What are the sources of new knowledge? Evidence of a worrying neglect of curiosity-driven scientific search in favour of more marketable applied projects, while private firms tend to do less basic research. Tighter appropriation via IPR increases rents, but has ambiguous (possibly negative) effects upon the rates of innovation, as revealed by the paradigmatic example of the development of COVID vaccines.
- What are the sources of productivity growth? The slow productivity growth in Europe is partly explained by a “prolonged creative destruction process” with slow business entry and exit dynamics. Moreover, the weakening of unions and wider dispersion of wages allow “laggard”/low-productivity firms to survive. Servitization is observed as a general tendency, but unrelated to sectoral productivity and employment growth.
- What are the sources of inequalities? Together with a decrease in the labour share, wage inequality is related to an incomplete pass-through of productivity gains to wages, which can be explained by the weakening of institutions aimed at workers ‘protection. Technology adoption does not seem to play a role in wage inequalities within firms. Conversely, the casualization of work, populated by information-based “winner takes almost all” firms, creates new (atypical) form of labour relations that threaten workers’ rights and wages.
- Does technological change lead to unemployment? The ultimate impacts depend on labour market regimes, income distribution and overall demand level, whereby a tighter regulation of the labour market akin to those in place in the sixties protects the economic system from technological unemployment.
Results have been constantly disseminated through various channels: the website, where all the outcomes of the research activity are collected; the social networks (Facebook, Twitter, LinkedIn); videos and infographics presenting the major findings; the participation and organisation of meetings and events; the project newsletter. Details on www.growinpro.eu
The project's results suggest a policy mix to unleash a sustainable and inclusive growth:
- Reforming the Intellectual Property Rights (IPR) regime to reduce science commercialization, and boost innovation, especially in the pharmaceutical sector where they constitute legal barriers to protect intellectual monopolies, thus stifling the discovery of new drugs. Proposal to modify the TRIPS treaty and to reform the EU Unitary Patent Package have been advance in a policy brief (http://www.growinpro.eu/patents-and-emergencies-lessons-not-learnt-from-the-COVID19-pandemic/)
- A new policy mix to support innovation. Indirect incentive-based innovation policies such as R&D subsidies and investment discounting may stimulate productivity growth and employment, but they are costly. Instead, high-risk high-return direct policies involving an active role of the state in the research landscape via mission-oriented policies are much more effective. University research and public procurement remain fundamental and should be strongly supported.
- “Good” structural reforms to regulate the labour market. To reduce income inequalities, support productivity growth and limit technological unemployment, labour market institutions should be reformed increasing the bargaining power of trade unions, introducing minimum wage requirements, limiting temporary labour contract, and reducing firms’ ability to fire at will.
- Climate-change policies. Carbon-pricing policies alone are ineffective to stay below the 2C target, as the minimum level required to trigger a rapid transition would be destabilizing for the economy. On the contrary, a mix of command-and-control regulation and subsidies for investments and R&D in green energy technologies can put the economy on a win-win sustainable growth pathway. Mission-oriented policies are synergic to climate policy and can ease the shift to a new, low-carbon growth path. Green credit and macroprudential policies can help to foster the decarbonization of the economy.
- Policy lessons from the COVID-19 pandemic. The European Union needs to embrace new policy actions able to prevent and manage collective diseases, increasing financing of high-risk research addressing the development of medical treatments, radical but less rewarded by the markets, as vaccination and prevention schemes. Policies to tackle expanding social inequalities are needed. Firms’ organizational capabilities, size and digitalisation determine firms’ performance during the crisis.
The policy conclusions of GROWINPRO are even more relevant in a world characterized by a global polycrisis, e.g. climate emergency, energy sovereignty, Russian invasion of Ukraine, high inflation COVID pandemic.
The complete documentation is available on the GROWINPRO website.
- Reforming the Intellectual Property Rights (IPR) regime to reduce science commercialization, and boost innovation, especially in the pharmaceutical sector where they constitute legal barriers to protect intellectual monopolies, thus stifling the discovery of new drugs. Proposal to modify the TRIPS treaty and to reform the EU Unitary Patent Package have been advance in a policy brief (http://www.growinpro.eu/patents-and-emergencies-lessons-not-learnt-from-the-COVID19-pandemic/)
- A new policy mix to support innovation. Indirect incentive-based innovation policies such as R&D subsidies and investment discounting may stimulate productivity growth and employment, but they are costly. Instead, high-risk high-return direct policies involving an active role of the state in the research landscape via mission-oriented policies are much more effective. University research and public procurement remain fundamental and should be strongly supported.
- “Good” structural reforms to regulate the labour market. To reduce income inequalities, support productivity growth and limit technological unemployment, labour market institutions should be reformed increasing the bargaining power of trade unions, introducing minimum wage requirements, limiting temporary labour contract, and reducing firms’ ability to fire at will.
- Climate-change policies. Carbon-pricing policies alone are ineffective to stay below the 2C target, as the minimum level required to trigger a rapid transition would be destabilizing for the economy. On the contrary, a mix of command-and-control regulation and subsidies for investments and R&D in green energy technologies can put the economy on a win-win sustainable growth pathway. Mission-oriented policies are synergic to climate policy and can ease the shift to a new, low-carbon growth path. Green credit and macroprudential policies can help to foster the decarbonization of the economy.
- Policy lessons from the COVID-19 pandemic. The European Union needs to embrace new policy actions able to prevent and manage collective diseases, increasing financing of high-risk research addressing the development of medical treatments, radical but less rewarded by the markets, as vaccination and prevention schemes. Policies to tackle expanding social inequalities are needed. Firms’ organizational capabilities, size and digitalisation determine firms’ performance during the crisis.
The policy conclusions of GROWINPRO are even more relevant in a world characterized by a global polycrisis, e.g. climate emergency, energy sovereignty, Russian invasion of Ukraine, high inflation COVID pandemic.
The complete documentation is available on the GROWINPRO website.