Manufacturing is the locus of U.S. innovation, accounting for more than three quarters of U.S. corporate patents. The rise of import competition from China has represented a major competitive shock to the sector, which in theory could benefit or stifle innovation. In this paper we empirically examine how rising import competition from China has affected U.S. innovation. We confront two empirical challenges in assessing the impact. We map all U.S. utility patents granted by March 2013 to firm-level data using a novel internet-based matching algorithm that corrects for a preponderance of false negatives when using firm names alone. And we contend with the fact that patenting is highly concentrated in certain product categories and that this concentration has been shifting over time. Accounting for secular trends in innovative activities, we find that the impact of the change in import exposure on the change in patents produced is strongly negative. It remains so once we add an extensive set of further industry- and firm-level controls. Rising import exposure also reduces global employment, global sales, and global R&D expenditure at the firm level. It would appear that a simple mechanism in which greater foreign competition induces U.S. manufacturing firms to contract their operations along multiple margins of activity goes a long way toward explaining the response of U.S. innovation to the China trade shock.
In a recent speech “Who owns a company?”, Andy Haldane has this to say:
In the earlier period, dividends decreased as often as they increased.This is as we would expect if profits fluctuate both up and down.After 1980, however, we see a one-way street.Dividend payout ratios almost never fall.This is evidence that the short-term quest for smoothing shareholder returns has come to dominate payout behaviour, almost irrespective of profitability.
Is short-termism quite the right expression for this phenomenon? 1 Even if you could divide a company’s share register into those with short and long-term investment horizons, there’s a paradox. Other things being equal, increasing the steadiness of the dividend stream doesn’t meet short-term shareholder needs. Firstly in a liquid share market, the distinction between income and capital value is pretty artificial. Shareholders generally seek the best return of income plus capital gain they can. And not only would you expect that. In a well-functioning market, the payment of a dividend would be reflected in an equal and opposite movement in the capital value of the companies’ shares, but that’s pretty much what you do see – at least on the day that shares go ex-dividend. 2
So it seems to me that this transition towards more steady payment of dividends can’t be explained by a move towards ‘short-termism’, or if it is, there’s something more to be explained – which is why such behaviour is more consistent with the interests of short-term than long-term investors. So I think we need to go looking for the real phenomenon here in the conditions under which the market might reward this kind of behaviour – which is clearly damaging to the wellbeing of companies in the market. It seems to me that the answer is tied up in the transition from some earlier form of capitalism towards managerial capitalism. If the capital market acted rationally, then, other things being equal, it would mark down companies that maintained continuity in their dividend payments when profitability fell, because this suggests bad management and increases in the firm’s financial fragility. 3Continue reading →
One preliminary point needs to be got out of the way for the purposes of discussion. There are two sides of the dividend transaction – the company and the shareholder. One possible legitimate reason for companies maintaining a more stable dividend policy is that their shareholders appreciate this and that shares are in competition with other assets like bonds and deposits and that therefore a more stable dividend policy represents a new compromise between the interests of the shareholders and ‘the company’ (ignoring the obvious fallacy of composition in that contrast). So to some extent, this development may not be pathological. I’m proceeding on the assumption that it’s not as simple as this – that this development suggests something fishy is going on. ↩
Indeed, in an efficient capital market, other things being equal, one can think of two reasons those with short-term time horizons might prefer capital gains to income. Dividends generate slow, steady gains whereas capital gains can come quickly as the market reevaluates its view of the long-term potential of a stock. And dividends are usually less tax-efficient than capital gains (though in Australia franking credits complicate this story.) ↩
Again I’m leaving aside the prospect that volatility of profits is likewise suppressed by management’s accounting decisions. ↩
I wasn’t a huge fan of George Michael, though I liked his songs, but I absolutely loved this one. So good to horse around on the dance floor to. When I was in my early 20s I was greatly taken with gay culture. It was a liberation movement whose tools were completely different to the others. Civil rights and feminism were full of the self-righteousness of their entirely just cause. One could attach one’s idealism to these causes, but their worthiness limited the extent to which they were naturally celebratory.
The gay rights movement was quite different. It’s whole modus operandi operated through its embrace of the unique culture it had built over the previous centuries in the shadow of the relentless anathematisation of homosexuality. Being a woman or being black wasn’t against the law. Being gay was.
And so gay culture arose from the need for deniability. Polari – a specific gay language 1 – provided one means of communicating what one wanted to without detection, but the principal weapon of choice was irony which allowed initiates to convey meaning – often quite explicitly – in ways that were quite undetectable to others.
As all liberation movements encounter the tension between the struggle for equality and, as that struggle succeeds retaining their own unique history and sensibility, gay culture seemed to be more insulated from those kinds of dilemmas. I expect that was part of the diffidence gay liberation activists of the 1970s have felt towards gay marriage, and in the upshot – in the age of gay marriage, I’m not so sure gay culture is insulated from being homogenised with the larger straight culture.It was a wonderful revelation and a liberation when I encountered it in my university years. George Michael was at the poppy-est end of the gay pop music spectrum, and except for “I’m your man” not my
In any event, it was a wonderful revelation and a liberation when I encountered gay culture in my university years. George Michael was at the poppy-est end of the gay pop music spectrum and, except for “I’m your man”, not my favourite. Meanwhile, New Romantic pop music was the first and perhaps only pop music craze that I really took to.
Anyway, now, sadly George Michael is no longer with us. R.I.P.
Or at least enough words to celebrate a unique sensibility and put outsiders off the scent. ↩
Well I came to this passage and thought it was the first thing the World Economic Forum have said in a while that I agree with. “A significant part of the global elite lost the sense of solidarity when it was needed.” But of course it was from the head of the WEF, so he couldn’t help himself adding to the end of the sentence “more than ever before” a particularly efficient way of signalling that one’s lack of concern with substantive matters when a cheap rhetorical cliché might be deployed.
Anyway it then went on to press a few of my buttons – for instance on deliberative democracy, before descending into more blather about “systems leadership”. What we need is “systems leaders” apparently. Srsly. And thus the business class proceeds on its merry, utterly atheoretical way. And just in case we find out what a “systems leader” is, how do we get one of those into a position of political power? Well there aren’t any tips on that alas.
Sky News’ Matt Cunningham is unimpressed by the actions of the Royal Commission into the Protection and Detention of Children in the Northern Territory, in restricting cross-examination of detainees, failing to proceed with hearings before Christmas, and obtaining a five month extension until next August from the Turnbull and Gunner governments and then promptly adjourning further hearings until March.
It’s been a great 15 years in Australia for me and the family, so we will be leaving lots of friends and colleagues behind as we seek new adventures in London, where from next week onwards I will be part of a Wellbeing centre, pretty much the same topic as the Australian Research Council has been generously funding me to look at for the last 3 years.
The essential aim of the ‘Centre of Wellbeing’ at LSE will be to put utilitarianism into practice as much as possible. To this end, we hope to be part of wellbeing policy experiments, textbooks on how a decision maker can be a better wellbeing-bringer, longitudinal studies, large data-gathering exercises, policy briefs, Master’s courses, inter-active wellbeing systems, and all the rest of it. We have partners all over the world and an international panel for wellbeing is up and running at the end of next week. If you happen to have a few million lying around to help us get to our goals quicker, then please help!
Whilst the grass is greenest in Australia, variety is the spice of life so I am looking forward tremendously to the new adventure. Still, the family is not truly leaving Australia, as my 3 kids now carry Australian citizenship and one kid is still studying in Sydney. So it is ‘Tot ziens’ (‘See ya later!’) rather than farewell!
To all my friends and colleagues in the Australian economics community: do come and look me up in London; please join in with utilitarian-oriented research projects; and best of luck.
We present results from the first study to examine the causal impact of early childhood education on social preferences of children. We compare children who, at 3-4 years old, were randomized into either a full-time preschool, a parenting program with incentives, or to a control group. We returned to the same children when they reached 7-8 years old and conducted a series of incentivized experiments to elicit their social preferences. We find that early childhood education has a strong causal impact on social preferences several years after the intervention: attending preschool makes children more egalitarian in their fairness view and the parenting program enhances the importance children place on efficiency relative to fairness. Our findings highlight the importance of taking a broad perspective when designing and evaluating early childhood educational programs, and provide evidence of how differences in institutional exposure may contribute to explaining heterogeneity in social preferences in society.