1) The document discusses how innovation does not always lead to increases in productivity and discusses recent trends showing declines in productivity growth and increases in markups. 2) It presents a framework for analyzing productivity at the micro and macro levels and the role of firm decisions, market environment, and policy. 3) The document proposes several policy directions to help innovation translate into productivity gains, such as rethinking intellectual property, ensuring income solidarity, and using data and AI to evaluate policy.

1. From Innovation to Productivity
Eric J. Bartelsman1
1Vrije Universiteit Amsterdam, Tinbergen Institute
Global Forum on Productivity
Sydney
June 20, 2019
EJB Innovation → Productivity

2. Great Outlook for Innovation
Public-Private Innovation Tactile Innovation
Learning Innovation Harvesting Innovation
EJB Innovation → Productivity

3. Juxtaposed with Declining Trend Productivity
source: The Conference Board (2019)
EJB Innovation → Productivity

4. Looking ahead through 2040
Technology for the coming decades is mostly available now
Timing of uptake, diffusion and impact is uncertain
Uptake and diffusion depend greatly on economic environment
Policy can influence uptake and diffusion and can mitigate
associated problems
New technologies are changing the ’economic production
technology’ used to convert primary inputs into well-being
Data and analytical frameworks for economic policy will need
to adapt
EJB Innovation → Productivity

5. Recent Worrisome Trends
Macro
TFP growth trending down
Labor share declining
Increasing mark-ups and profit margins
Micro
Frontier productivity growth is robust
Firm-level dynamism may be declining
Research talent is being hoarded
EJB Innovation → Productivity

6. Framework for Micro-to-Macro Productivity Analysis
Drivers of productivity (Syverson, 2011)
Firm-level
Discrete decisions: Entry; Innovation (or tech adoption); Exit
Continuous optimization of factor inputs (and pricing in case
of imperfect comp)
Market environment
Policy framework (product and input markets; anti-trust;
intellectual property regime)
Demand side: What do people want and need?
Data driven analysis: Cross-country firm and worker data
EJB Innovation → Productivity

7. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly:
EJB Innovation → Productivity

8. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
EJB Innovation → Productivity

9. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
How to prevent concentration and market foreclosure:
EJB Innovation → Productivity

10. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
How to prevent concentration and market foreclosure:
Platform regulation; secure, open data
EJB Innovation → Productivity

11. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
How to prevent concentration and market foreclosure:
Platform regulation; secure, open data
How to allay societal fears about jobs, income, future:
EJB Innovation → Productivity

12. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
How to prevent concentration and market foreclosure:
Platform regulation; secure, open data
How to allay societal fears about jobs, income, future: clear
and factual narrative
EJB Innovation → Productivity

13. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
How to prevent concentration and market foreclosure:
Platform regulation; secure, open data
How to allay societal fears about jobs, income, future: clear
and factual narrative
How to highlight an encourage socially beneficial aspects of
new technologies:
EJB Innovation → Productivity

14. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
How to prevent concentration and market foreclosure:
Platform regulation; secure, open data
How to allay societal fears about jobs, income, future: clear
and factual narrative
How to highlight an encourage socially beneficial aspects of
new technologies: social dialog and directed innovation
EJB Innovation → Productivity

15. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
How to prevent concentration and market foreclosure:
Platform regulation; secure, open data
How to allay societal fears about jobs, income, future: clear
and factual narrative
How to highlight an encourage socially beneficial aspects of
new technologies: social dialog and directed innovation
How to encourage firms to invest in (adopt) welfare enhancing
technology:
EJB Innovation → Productivity

16. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
How to prevent concentration and market foreclosure:
Platform regulation; secure, open data
How to allay societal fears about jobs, income, future: clear
and factual narrative
How to highlight an encourage socially beneficial aspects of
new technologies: social dialog and directed innovation
How to encourage firms to invest in (adopt) welfare enhancing
technology: carrot and stick; flexible markets
EJB Innovation → Productivity

17. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
How to prevent concentration and market foreclosure:
Platform regulation; secure, open data
How to allay societal fears about jobs, income, future: clear
and factual narrative
How to highlight an encourage socially beneficial aspects of
new technologies: social dialog and directed innovation
How to encourage firms to invest in (adopt) welfare enhancing
technology: carrot and stick; flexible markets
How to stimulate the production of new ideas and new
technology:
EJB Innovation → Productivity

18. Policy: Enabling, Guiding, Stimulating
How to keep circular flow of consumption and production
going smoothly: income distribution; mutualization of
winner-take-all
How to prevent concentration and market foreclosure:
Platform regulation; secure, open data
How to allay societal fears about jobs, income, future: clear
and factual narrative
How to highlight an encourage socially beneficial aspects of
new technologies: social dialog and directed innovation
How to encourage firms to invest in (adopt) welfare enhancing
technology: carrot and stick; flexible markets
How to stimulate the production of new ideas and new
technology: Education; IP and market power vs open source+
EJB Innovation → Productivity

19. Structural Policy Directions
Rethinking intellectual property rights: crucial, especially wrt
data. Providers of data should remain owners (EU GDPR)
New forms of income and job solidarity not tied to tangible
capital (ie traditional employer)
By occupation; geographical; by skill type
Trade-offs in solidarity, moral hazard, adverse selection
Incentives for human capital investment
International coordination on taxing intangibles: G20 and
OECD
Platforms are markets: and markets are social/communal
constructs.
Using AI for policy evaluation and decision making:
Public-private data sharing, continuous experimentation and
learning.
EJB Innovation → Productivity

20. Policy example: Intelligent Transportation Platforms
Goal: Efficient,seemless multi-model transport
Means: Dynamic, innovative, competitive market with strong
public oversight
Policy items
Open platform for messaging between suppliers and customers
Open historical transaction data
Competition in: interfaces and back-offices; transport suppliers
Well regulated: dynamic capacity restriction (tax for empty
vehicles); non-discriminatory access between all customers and
suppliers; non-discriminatory access to data; regulations on
standards, safety, minimum wage
EJB Innovation → Productivity

21. Moving Forward
Understanding the effects of innovative technologies on the
functioning of the economy is of first-order importance
Policy signalling, development, and evaluation is crucial:
costly and long-lasting policy mistakes are about to be made
Cross-country analysis of rich micro data, with inputs,
outputs, markets, and technologies is needed for identification
Without policy that enables, guides, and stimulates,
innovation will not translate into productivity and well-being
EJB Innovation → Productivity