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11. Concentrating Intelligence: Scaling and Market Structure in Artificial Intelligence

Author:
Anton Korinek and Jai Vipra
Publication Date:
10-2024
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper examines the evolving structure and competition dynamics of the rapidly growing market for foundation models, focusing on large language models (LLMs). We describe the technological characteristics that shape the industry and have given rise to fierce competition among the leading players. The paper analyzes the cost structure of foundation models, emphasizing the importance of key inputs such as computational resources, data, and talent, and identifies significant economies of scale and scope that may create a tendency towards greater market concentration in the future. We explore two concerns for competition, the risk of market tipping and the implications of vertical integration, and use our analysis to inform policy remedies to maintain a competitive landscape.
Topic:
Markets, Economy, Business, Innovation, Artificial Intelligence, and Large Language Models (LLMs)
Political Geography:
Global Focus

12. The Percolation of Knowledge across Space

Author:
Pierre Cotterlaz and Arthur Guillouzouic
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
This paper shows that the negative effect of geographical distance on knowledge flows stems from how firms gain sources of knowledge through their existing network. We start by documenting two stylized facts. First, in aggregate, the distance elasticity of patent citations flows has remained constant since the 1980s, despite the rise of the internet. Second, at the micro level, firms disproportionately cite existing knowledge sources, and patents cited by their sources. We introduce a framework featuring the latter phenomenon, and generating a negative distance elasticity in aggregate. The model predicts Pareto-distributed innovator sizes, and citation distances increasing with innovator size. These predictions hold well empirically. We investigate changes of the underlying parameters and geographical composition effects over the period. While the distance effect should have decreased with constant country composition, the rise of East Asian economies, associated to large distance elasticities, compensated lower frictions in other countries.
Topic:
Economy, Innovation, Patents, and Knowledge Diffusion
Political Geography:
East Asia and Global Focus

13. Pioneering a new classification: a comprehensive study of healthcare products in global trade

Author:
Pierre Cotterlaz, Guillaume Gaulier, Aude Sztulman, and Deniz Ünal
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
International trade in healthcare products took off in the 2000s at the height of hyper-globalisation. Twenty years on, the Covid-19 shock drove home to governments the importance of health security and trained the spotlight on the industrial sovereignty issues raised by the international organisation of production. However, the tangled web of international value chains has compromised the traceability of the manufacturing of these essential goods. In addition, the classification of healthcare products across a multitude of industries in the trade and production nomenclatures makes them hard to identify and muddies the picture further. In this paper, we have painstakingly identified these products and classified them together in one industry grouping to assess the scale of and trends in trade to meet the needs of national health systems. Covering a vast range of products (medicinal products and their compounds, medical technology equipment and small medical materials), this healthcare industry grouping has posted the strongest relative growth since 2000, rising to take the number two share of world trade in 2021 just behind electronic products. This paper details the nature of world trade in the healthcare industry grouping and its five branches by production stage (intermediate and final), type of trade flows (one-way and two-way) and quality/price range. It goes on to present how the advanced countries are positioned compared with the rest.
Topic:
Health, International Trade and Finance, Developing World, Economy, and Emerging Economies
Political Geography:
Global Focus

14. Are Mass Layoffs Individually Costly But Socially Beneficial?

Author:
Axelle Arquie and Thomas Grjebine
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
Relying on rich administrative data, this paper examines the adaptive capabilities of the French labor market in the aftermath of large-scale layoffs in the manufacturing sector. We assess both individual and aggregate effects of these shocks, using a unique quantitative definition of mass layoffs. We first show that displaced workers suffer a long-lasting increase in the probability of being unemployed and, for those who find a job, a decrease in their salary. While mass layoffs entail costs for displaced workers, there is a possible social benefit if they result in productive reallocation of workers to the most innovative companies and in the creation of new firms. Remarkably, our findings indicate that firms that hire displaced workers exhibit lower investment rates, decreased value added, and a reduced workforce, with a higher proportion of employees on fixed-term contracts. Additionally, mass layoffs do not contribute to the enhancement of allocative efficiency, as the most skilled workers are less likely to be matched with the most successful establishments. Furthermore, we assess the extent to which local economies adapt to these shocks, revealing that, six years after the mass layoff event, the local unemployment rate is 12% higher in comparison to unaffected regions. Lastly, the affected areas experience a diminished share of new establishment creation.
Topic:
Employment, Economy, and Layoffs
Political Geography:
Global Focus

15. From Dual Roles to Dynamic Equilibrium: An Overview of Theoretical Perspectives Used in Studies Addressing Work-Life Struggles of Working Mothers

Author:
Merve Gerçek
Publication Date:
04-2024
Content Type:
Journal Article
Journal:
Journal of Academic Inquiries
Institution:
Sakarya University (SAU)
Abstract:
There has been much scholarly attention given to the role of women in the labor market throughout the years. While there are plenty of evaluations of ideas and perspectives regarding work-life concepts, there is limited understanding regarding the theoretical foundation of work-life concerns specifically about mothers. This study aims to provide an overview of theories used to investigate the work-life issues of working mothers. The data were collected from the Web of Science database. A total of 63 research studies examining the work-life challenges faced by employed women were evaluated based on theoretical frameworks. It was seen that identity theory and gender perspective are dominant perspectives in the current literature. In addition, the prevailing work-life perspectives adopted in the studies are work-life balance and work-life conflict. The study offers a detailed examination of the various theoretical perspectives employed in understanding the work-life difficulties encountered by employed mothers.
Topic:
Labor Issues, Economy, Labor Market, and Mothers
Political Geography:
Global Focus

16. Climate and Development KPIs

Author:
Ian Mitchell and Edward Wickstead
Publication Date:
11-2024
Content Type:
Policy Brief
Institution:
Center for Global Development (CGD)
Abstract:
How committed are countries to tackling climate change at home and in developing countries? These tables provides nine key indicators on the world’s major economies spanning their climate contributions in three areas: emissions, policy, and international finance. Indicators are calculated to be comparable between countries with several expressed relative to population or economy size. Countries are ordered by the number of indicators on which they score in the best quartile, with indicators shaded for top quartile performance.
Topic:
Climate Change, Development, Climate Finance, and Economy
Political Geography:
Global Focus

17. Is “High Inflation” Always and Everywhere an Exchange Rate Phenomenon?

Author:
Tural Yusifzada, Hasan Cömert, and Kagan Parmaksiz
Publication Date:
10-2024
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
After decades of stable and low levels of inflation throughout the world, the recent global upsurge in inflation has once again triggered extensive debate among economists about the underlying reasons for the rising trend in inflation. This study aims to contribute to this ongoing discussion by exploring a potential channel that could be fundamental to our understanding of the high inflation levels common across a large number of countries. Drawing upon a rich historical dataset spanning from 1961 to 2023 and employing a random effects panel probit model, our research reveals that the nominal exchange rate depreciation emerges as a strong predictor of “high inflation” episodes across different economies and time periods. Notably, this predictive capability extends to countries with varying income levels, with high-income, upper-middle-income, and lower-middle-income nations exhibiting success rates of 70%, 77%, and 63%, respectively, in forecasting “high inflation” based solely on exchange rate depreciation. Furthermore, food and energy prices also emerge as other important contributors to inflation. These findings have important implications for recognizing exchange rate depreciation as a vital early warning signal for high inflation not only facilitates more timely and effective policy interventions but also emphasizes the critical role of historical exchange rate dynamics and supplyside factors in comprehending the complexities of “high inflation.”
Topic:
Economy, Inflation, Exchange Rates, Early Warning, and Panel Probit Model
Political Geography:
Global Focus

18. The Profitability of Bank Capital and Household Debt

Author:
Hyun Woong Park
Publication Date:
08-2024
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
When does the banking sector profitability exceed the industrial sector profitability? In a benchmark, counterfactual scenario where banks lend to industrial firms only, the industrial profitability exceeds the bank profitability unless the banks’ financial intermediation technology is sufficiently advanced and the industrial sector’s leverage ratio is sufficiently high. In a more realistic scenario where the banks lend not only to the industrial firms and but also to households, which rely on bank loans for housing, vehicle, education, etc., the bank profitability exceeds the industrial profitability when the household sector’s total debt services are sufficiently large, regardless of the levels of the banks’ financial technology and the industrial sector’s leverage ratio. It suggests that the households’ debt and interest payments are potentially a important source of the bank profitability exceeding the industrial profitability. That is, the bank capital beat the industrial capital in terms of profitability by exploiting the households’ financial conditions that force them to rely on debt for their full reproduction. Lastly, this result is empirically confirmed through the ARDL cointegration analysis with the U.S. quarterly data for 1984–2020.
Topic:
Debt, Economy, Capital, and Banking
Political Geography:
Global Focus

19. Crafting a Robust U.S. Carbon Border Adjustment Mechanism

Author:
Sanam Rasool, William Alan Reinsch, and Thibault Denamiel
Publication Date:
08-2024
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
The introduction of a carbon border adjustment mechanism (CBAM) in the United States presents an intricate policy challenge at the intersection of climate action and international trade. With countries around the world integrating climate considerations into their trade policies, the United States is under growing pressure to develop and implement its own CBAM. This policy tool, already adopted by the European Union, is geared toward leveling the playing field for domestic industries while promoting global climate action and accountability. A future U.S. CBAM could serve as a vital instrument in the nation’s transition toward a net-zero economy, encouraging domestic carbon footprint reduction and driving trading partners to adopt cleaner practices. However, crafting and rolling out such a mechanism comes with knotty challenges, ranging from choosing optimal carbon accounting methods and pricing to warding off potential trade disputes and garnering global collaboration. As the United States charts its course through this complex policy landscape, it has the opportunity to shape global climate action while safeguarding its economic interests.
Topic:
Climate Change, International Trade and Finance, Economy, and Carbon Border Adjustment Mechanism (CBAM)
Political Geography:
North America, Global Focus, and United States of America

20. Alternatives to the U.S. Dollar as a Global Currency Face Brick Walls

Author:
Piotr Dzierżanowski
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
The Polish Institute of International Affairs
Abstract:
In the wake of a series of economic and political crises, including developing countries’ external debt crisis and Russian aggression against Ukraine and related sanctions, there has been speculation about the possible replacement of the U.S. dollar (USD) in the global economy. This could take place through the emergence of a new global currency or a shift to settlements in the currencies of the transacting parties. Either of these solutions involves political and economic difficulties and is not currently realistic. It is advisable that Poland, in its foreign policy, assumes the continuation of the dominance of USD in the global economy.
Topic:
Debt, Economy, Currency, and Dollar
Political Geography:
Poland and Global Focus