General Scope of the Project

The “micro” approach of the project will study the impact of the diffusion and adoption of new technologies and of government policies in determining innovation, investment and performance at firm level. The “macro” approach of the project will analyse its aggregate implications in terms of productivity, misallocation of capital, the transmission of technology shocks and long-term growth.

Diffusion of Intangible Capital and Technology: Measurement and Implications for Productivity Growth, Market Power and Wage Inequality

The first part of the project is motivated by Europe’s weak productivity growth, a subject that concerns the EIB Group and is of great importance for policy makers. The changing dynamics of technology diffusion and adoption seem to be crucial in explaining this trend. In this sense, the analysis will start from the fact that younger, less productive companies have trouble improving their technology and productivity and compete with market-leaders: this discourages the entry of new firms in the market, reduces competition, and increases the monopoly power of the dominant companies, potentially decreasing their incentives to innovate. Accordingly, the project will investigate the factors that explain the links between technological progress, the diffusion of technology, and the implications for aggregate productivity.
 

The Investment-Promoting Role of Government Policy: Measurement and Implications for Capital Misallocation and Long-Run Growth

The second part of the project considers that one major determinant of firm investment and long-term growth in Europe is the crucial role played by government policies: public procurement is one of the main budgetary items of public expenditure, and governments are the main buyers from some major industries, such as construction, transport, waste management and energy. In addition, government policies will be even more important in the coming years since the covid-19 crisis will continue to pose significant economic challenges for all countries. The project will investigate the importance of the two major policy tools that governments have available to allocate resources -government spending through public procurement and associated fiscal policies- in promoting private investment.