How patents block innovation: just where you’d expect they would

Patents and Cumulative Innovation: Causal Evidence from the Courts
by Alberto Galasso, Mark Schankerman – #20269 (IO PR)

Cumulative innovation is central to economic growth. Do patent rights facilitate or impede follow-on innovation? We study the causal effect of removing patent rights by court invalidation on subsequent research related to the focal patent, as measured by later citations. We exploit random allocation of judges at the U.S. Court of Appeals for the Federal Circuit to control for endogeneity of patent invalidation. Patent invalidation leads to a 50 percent increase in citations to the focal patent, on average, but the impact is heterogeneous and depends on characteristics of the bargaining environment. Patent rights block downstream innovation in computers, electronics and medical instruments, but not in drugs, chemicals or mechanical technologies. Moreover, the effect is entirely driven by invalidation of patents owned by large patentees that triggers more follow-on innovation by small firms.

Australia: blokey from the get-go

It’s Raining Men! Hallelujah?
Pauline Grosjean and Rose Khattar

We document the implications of missing women in the short and long run. We exploit a natural historical experiment, which sent large numbers of male convicts and far fewer female convicts to Australia in the 18th and 19th century. In areas with higher gender imbalance, women historically married more, worked less, and were less likely to occupy high-rank occupations. Today, people living in those areas have more conservative attitudes towards women working and women are still less likely to have high-ranking occupations. We document the role of vertical cultural transmission and of homogamy in the marriage market in sustaining cultural persistence. Conservative gender norms may have been beneficial historically, but are no longer necessarily so. Historical gender imbalance is associated with an aggregate income loss estimated at $800 per year, per person. Our results are robust to a wide array of geographic, historical and present-day controls, including migration and state fixed effects, and to instrumenting the overall sex ratio by the sex ratio among convicts.

Keywords: Culture, gender roles, sex ratio, natural experiment, Australia
JEL: I31 N37 J16

Open Data and the G20

OpenGovData Venn

From a recent column for the AFR. The report can be downloaded here.

Earlier this year our Treasurer, Joe Hockey, led the G20 Finance Ministers to pledge lifting GDP by 2 percent over ‘business as usual’ over the next five years. It’s a big win for the Treasurer, but how can it be delivered? There aren’t many easy options for reform on that scale that don’t create swathes of losers around whom the media then swarm, thus amplifying the inevitable campaigns against change.

But one opportunity is sitting under our noses. In a knowledge economy, data is the new infrastructure. The more open it is, the more it can be reused repurposed. The more it attracts value adding as business and civil society find clever new ways of making it ever more useful. Most data Google Maps delivers has existed for decades. But government open data policies – and Google – convey open data seamlessly to your mobile as you search out your target.

That’s why, Australia’s Government implemented the recommendations of the 2009 Government 2.0 Taskforce which I chaired. But in Australia as elsewhere, high-level commitments have achieved less than they could have if they’d been seamlessly translated down to the delivery coalface as Google has with geospatial data.

Omidyar Network today releases a Lateral Economics report that estimates that a more vigorous open data commitment could grow Australia’s economy by around $16 billion per year. That’s half Joe Hockey’s G20 growth target.

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Clever new piece of work on what drove the industrial revolution

Human Capital and Industrialization: Evidence from the Age of

by Mara P. Squicciarini, Nico Voigtlaender – #20219 (DAE EFG)


While human capital is a strong predictor of economic development today, its importance for the Industrial Revolution is typically assessed as minor. To resolve this puzzling contrast, we differentiate average human capital (worker skills) from upper tail knowledge both theoretically and empirically. We build a simple spatial model, where worker skills raise the local productivity in a given technology, while scientific knowledge enables local entrepreneurs to keep up with a rapidly advancing technological frontier. The model predicts that the local presence of knowledge elites is unimportant in the pre-industrial era, but drives growth thereafter; worker skills, in contrast, are not crucial for growth. To measure the historical presence of knowledge elites, we use city-level subscriptions to the famous Encyclopedie in mid-18th century France. We show that subscriber density is a strong predictor of city growth after 1750, but not before the onset of French industrialization. Alternative measures of development confirm this pattern: soldier height and industrial activity are strongly associated with subscriber density after, but not before, 1750. Literacy, on the other hand, does not predict growth. Finally, by joining data on British patents with a large French firm survey from 1837, we provide evidence for the mechanism: upper tail knowledge raised the productivity in innovative industrial technology.

Do people know what’s good for them – or their children. (Hint: Not always)

Human Capital Effects of Anti-Poverty Programs: Evidence from a Randomized Housing Voucher Lottery by Brian Jacob, Max Kapustin, Jens Ludwig – #20164 (CH ED HE PE)


Whether government transfer programs increase the human capital of low-income children is a question of first-order policy importance. Such policies might help poor children if their parents are credit constrained, and so under-invest in their human capital. But it is also possible that whatever causes parents to have low incomes might also directly influence children’s development, in which case transfer programs need not improve poor children’s long-term life chances. While several recent influential studies suggest anti-poverty programs have larger human capital effects per dollar spent than do even the best educational interventions, identification is a challenge because most transfer programs are entitlements. We overcome that problem by studying the effects on children of a generous transfer program that is heavily rationed–means-tested housing assistance. We take advantage of a randomized housing voucher lottery in Chicago in 1997, for which 82,607 people applied, and use administrative data on schooling, arrests, and health to track children’s outcomes over 14 years. We focus on families living in unsubsidized private housing at baseline, for whom voucher receipt generates large changes in both housing and non-housing consumption. Estimated effects are mostly statistically insignificant and always much smaller than those from recent studies of cash transfers, and are smaller on a per dollar basis than the best educational interventions.


Unveiling of a portrait

Just a note to let people know of the unveiling of a magnificent portrait of my father, discovered some years after he died. It’s in Canberra on Tuesday afternoon.

Here’s the invitation. Perhaps I’ll see you there.

Professor Rabee Tourky
Professor Bruce Chapman
Emeritus Professor Bob Gregory

request the pleasure of your company on behalf of the
Research School of Economics and Crawford School of Public Policy

at the portrait unveiling ceremony of the late
Professor Fred H Gruen

to celebrate and recognise his significant contribution to
Economics and Australian Public Policy at The Australian National University

Launch talk by Dr Martin Parkinson, Secretary to the Treasury

5.30pm – 7.30pm Tuesday 6 May 2014


Ground Floor Foyer
ANU College of Business and Economics Building 26C
Kingsley Street, Acton

Refreshments will be provided