Journal of Evolutionary Economics

Over the last few decades world population has undergone an unprecedented process of aging, which has been having a significant impact on the macroeconomy. In this paper we propose a new agent-based macro model designed to study the macroeconomic consequences of aging. Using the model as a computational laboratory we test four hypotheses based on empirical evidence - namely that aging decreases real output and real interest rates, while increases trend inflation and income inequality. In general, performing several sensitivity analysis exercises and controlling for three different pension systems (pay-as-you-go and fully-funded), we find enough evidence supporting the hypotheses, especially in the fully-funded scenario. Moreover, we assess the ability of three policy responses to contrast the effects of aging: increasing the retirement age, reducing the amount of pensions and stimulating technological progress, finding that the last one is probably the best.

Our paper explains the 2007-8 financial crisis by drawing on a financial reading of Schumpeter’s and Minsky’s contributions, in particular using an adapted version of Minsky’s financial instability hypothesis that is consistent with the key features of a financialized monetary theory of production. We argue that the pathogens that led to the crisis were inherent in the specific innovative form that US capitalism assumed since the early 1980s. Our interpretation of the crisis can be summarized as the description of a ‘financial demand-driven macro-dynamics’. The voracious demand for securities by the actors involved in the securitization process triggered an explosive production of structured financial products, for which the condition of chronic indebtedness of the household sector was the fundamental raw material.

Information represents an essential input in social processes influencing human sentiment, attitudes, and behavior. With the rise of internet, information consumption habits have changed. The standard process of consuming news via traditional mass media (such as newspapers, radio and television) is now substituted, or complemented by news consumption via online sources. We study the effects of this behavioral change on environmental attitudes in Europe. More precisely, we ask whether this change has contributed to increased polarisation in environmental attitudes. We utilize a large-scale survey data across multiple European countries in the period from 2002 to 2010. We find evidence that traditional media (television, radio and newspapers) consumption, as well as internet use is associated with pro-environmental attitudes. Importantly, we also show that political preferences of an individual moderate the manner in which internet use is related to environmental attitudes. Among progressive and green voters, greater internet use is positively correlated with environmental attitudes. Among conservative voters, internet use appears to be negatively related to environmental attitudes. The pattern is similar, but much weaker, for TV consumption which constitutes a similar high-choice environment (compared to radio and newspapers). These results support the notion that internet use tends to strengthen people’s pre-existing beliefs (measured by voting behavior), much beyond the effect of TV viewership.

Understanding dynamics on institution for sustainable development of society is a topical issue. Researchers in the past have qualitatively analyzed factors, such as inertia, that influence institutional evolution. This study proposes a quantitative approach. Using algorithms, we establish a phylogenetic tree based on data from the power sector institution of OECD countries during 1985–2019. Our results are verified by historical events in power sector institutions, such as the global change to a privatized competitive market and institutional revolution of the United Kingdom in 1990. We propose two quantitative measurements based on this tree: institutional inertia (which resists change) and ecological pressure (which causes change). Both institutional inertia and ecological pressure alter the dynamics of institutional evolution to be either gradual or rapid, respectively. Specifically, inertia causes a pattern shift from phyletic gradualism to punctuated equilibrium due to its diverse effect on institutional evolution. In the phyletic gradualism pattern, it suppresses rapid institutional change; however, it becomes stronger endogenously as institutions evolve and shifts the pattern to punctuated equilibrium. Using the phylogenetic tree to simultaneously analyze gradual and rapid institutional change is novel.

Previous research has established the benefits of knowledge for firm competitive advantage. Knowledge does not, however, seamlessly transfer around an organization. Research suggests that the organizations coordination structures, the heterogeneity of knowledge within an organization, and social network structure are three critical factors that can enable and constrain the transfer and aggregation of knowledge that are held by individuals and units. These three factors, however, have rarely been examined together. We use an agent based model to simulate different configurations of the three factors. We find that in decentralized coordination structures, when there is a relatively high degree of knowledge homogeneity across units, there is an advantage for actors to have a social network structure that crosses unit boundaries. This is not the case in a centralized coordination structure where there is an advantage for actors to have social network structures that remain within unit boundaries. The exception is when actors have cross-unit brokerage ties that are embedded in social networks that have a small world structure, regardless of knowledge heterogeneity. At the unit level, we find that for both centralized and decentralized reporting structures, variability of knowledge aggregation across units is higher when there is greater knowledge homogeneity between units. Overall, our results are robust to various changes in the initial parameters.

Complexity science permeates the policy spectrum but not antitrust. This is unfortunate. Complexity science provides a high-resolution screen on the empirical realities of markets. And it enables a rich understanding of competition, beyond the reductionist descriptions of markets and firms proposed by neoclassical models and their contemporary neo-Brandeisian critique. New insights arise from the key teachings of complexity science, like feedback loops and the role of uncertainty. The present article lays down the building blocks of a complexity-minded antitrust method.

AI is transforming labor markets around the world. Existing research has focused on advanced economies but has neglected developing economies. Different impacts of AI on labor markets in different countries arise not only from heterogeneous occupational structures, but also from the fact that occupations vary across countries in their composition of tasks. We propose a new methodology to translate existing measures of AI impacts that were developed for the US to countries at various levels of economic development. Our method assesses semantic similarities between textual descriptions of work activities in the US and workers’ skills elicited in surveys for other countries. We implement the approach using the measure of suitability of work activities for machine learning provided by Brynjolfsson et al. (Am Econ Assoc Pap Proc 108:43-47, 2018) for the US and the World Bank’s STEP survey for Lao PDR and Viet Nam. Our approach allows characterizing the extent to which workers and occupations in a given country are subject to destructive digitalization, which puts workers at risk of being displaced, in contrast to transformative digitalization, which tends to benefit workers. We find that workers in urban Viet Nam, in comparison to Lao PDR, are more concentrated in occupations affected by AI, which requires them to adapt or puts them at risk of being partially displaced. Our method based on semantic textual similarities using SBERT is advantageous compared to approaches transferring AI impact scores across countries using crosswalks of occupational codes.

In developing countries, the evidence regarding the direct and indirect effects of FDI on economic and financial performance at the firm level is mixed. To contribute to this literature, we provide empirical evidence of direct and indirect effects of FDI on firm’s performance, using return on assets (ROA), gross revenues and gross revenues growth rate as performance measures. We examine the private formal enterprise sector in Ecuador from 2007 to 2018. Our identification strategy relies on the use of the Generalized Method of Moments (GMM) methodology for dynamic panel data which allows us to control for potential endogeneity, autocorrelation and heteroskedasticity issues. The results suggest that firms with inward FDI grow faster than their counterparts, and firms with higher amounts of FDI as a share of total revenues have on average higher levels of gross revenues. Moreover, we find negative horizontal wages and gross revenues spillover effects on gross revenues growth rates, but positive horizontal gross revenues spillover effects on ROA. There is also significant evidence of negative horizontal spillover effects in all economic sectors, whereas evidence for forward and backward spillovers is heterogeneous across them.

Why do dominant incumbents decline? Extant analyses of declining dominance largely focus on the erosion of technological bases of dominance. In contrast, our novel explanation focuses on the effect of geographic fragmentation on the erosion of demand-side barriers to entry and rise in strategic rivalry along the evolutionary path of the dominant incumbent’s growing industry. Our theoretical setting specifies a variation in demand-side structural characteristics across and within the independent geographic sub-markets of the dominant incumbent’s industry to simulate spatial and temporal variation in entry and competitive conditions. A unique unbalanced panel of independent geographic sub-markets in the US Long-distance telecommunications services industry during 1990–1996 provides the empirical setting to test a few novel hypotheses concerning the decline of a dominant incumbent under conditions of increasing geographic fragmentation.

We investigate the effect of labor productivity growth, workers’ bargaining power, and legal minimum wage revision rules on income distribution in a novel agent-based macroeconomic model mostly inspired by the post-Keynesian literature. Its main novelties are a wage bargaining process and a mark-up adjustment rule featuring a broader set of dimensions and coupled channels of interaction. The former allows nominal wages to be endogenously determined by interactions involving firms and workers, which are mediated by workers’ bargaining power. The latter assumes that firms also consider their position relative to workers (through their unit costs) to set their mark-up rates, thus linking the evolution of nominal wages in the bargaining process and labor productivity growth to the functional income distribution. This has implications for the personal income distribution through a three-class structure for households. The model reproduces numerous stylized facts, including those concerning the income distribution dynamics. By capturing the inherent social conflict over the distribution of income, our results show the importance of the coevolutionary interaction between workers’ bargaining power and productivity growth to the dynamics of income inequality and to its relationship with output. This leads to a policy dilemma between promoting productivity growth and improving income equality which can, nonetheless, be attenuated by combining policies and institutions that protect workers with policies that stimulate technological innovation and productivity growth.

The advent of artificial intelligence is changing the task allocation of workers and machines in firms’ production processes with potentially wide ranging effects on workers and firms. We develop an agent-based simulation framework to investigate the consequences of different types of automation for industry output, the wage distribution, the labor share, and industry dynamics. It is shown how the competitiveness of markets, in particular barriers to entry, changes the effects that automation has on various outcome variables, and to which extent heterogeneous workers with distinct general skill endowments and heterogeneous firms featuring distinct wage offer rules affect the channels via which automation changes market outcomes.

Financial services are enduring a profound transformation. Disruptive technologies are rewiring the broking, insurance, payment, lending and wealth management services. Fintech innovations are reshaping economies and societies by democratizing financial services. Digital payment services, crowdfunding, crowdlending, digital currencies, online discount broking and Robo-advisory services are extending financial services to the unserved segments of society through low-cost innovative solutions. Although fintech has attracted a lot of media attention, however, there is a dearth of literature on the effect of financial technologies on the overall economic outlook of economies. The present book explores the economic and social impact of fintech services. This book offers a research-based view of fintech?s potential impact on fostering greater financial inclusion and reducing economic inequality. JEL Codes G11 · G2 · L1 Financial services have experienced a massive mutation over the last decade (Tao et al. 2022). Disruptive technologies are rewiring financial services such as insurance , payment, lending, and wealth management. Fintech innovations are reshaping economies and society by democratizing financial services. Digital payment services, crowdfunding, crowdlending, digital currencies, online discount broking, and robo-advisory services are extending financial services to the unserved segments of society

Firms with the assets complementary to Artificial Intelligence (AI) have actively conducted AI research and selectively published their results since AI has resurged around 2006. Focusing on the recent AI development, we investigate how and to what extent firms’ deep engagement in the publication of emerging science-related technology can influence the evolution of published knowledge. Using bibliometric analyses applied to the papers in major AI conferences and journals, we find that papers with at least one author affiliated to a firm, and particularly papers with only firm-affiliated author(s), have had higher influence on the formation of published knowledge trajectory than other papers. In addition, papers from firm and non-firm (university and public research institution) collaborations show higher novelty and conventionality than other papers. These findings deepen our understanding of the role of firms in the evolution of emerging science-related technology.

This paper models the formation of R&D networks in an oligopolistic industry. In particular, it focuses on the coevolutionary process involving firms’ technological capabilities, market structure and the network of interfirm technological agreements. The main result of the paper is that the R&D network can work as a strong selection mechanism in the industry, creating ex post asymmetries among ex ante similar firms. This is due to a self-reinforcing, path-dependent process, in which events in the early stages of the industry affect firms’ survival in the long run. In this framework, both market and technological externalities created by the formation of cooperative agreements play a role. Although the R&D network creates profound differences at the beginning, which are reflected by an unequal distribution of links, it tends to eliminate them as it becomes denser and denser. The nature of the technological environment affects the speed of the transition and some of the characteristics of the industry in the long run.

The paper investigates the cognitive determinants of routinization and creativity by means of a lab-in-the-field experiment run at the 20th edition of a mass gathering festival in Italy (“La Notte della Taranta”). Subjects play repeatedly the puzzle version of the Target-The-Two game (32 hands). In hands 1-16, the strategy that is optimal given the card distribution is always the same and it is the easiest to be discovered. Conversely, in hands 17-32, subjects are exposed to games where the optimal contextual strategy may differ from the one with which they have been made familiar. We investigate whether and how, in hands 17-32, subjects remain routinized on the familiar strategy, or creatively choose a different one. We define as “experts” those subjects who played the optimal contextual strategy in the overwhelming majority of hands 1-16. In hands 17-32, we find several subjects playing the familiar strategy even when it is not the optimal one, regardless of whether they are experts or not. This shows that routinization is deep-rooted in the cognitive individual process. Furthermore, routinization pays off only for inexpert subjects: creative inexpert subjects are slower and they fail to find the optimal contextual strategy in several hands. Among expert subjects instead, creative subjects, although still slower, need less moves than routinized ones to find the optimal contextual strategy.

We devise a Directed Technical Change (DTC) multisector Schumpeterian growth model in which both wage inequality and wage polarization are analysed. To that end, we introduced tasks in the model, some of which can be automated – replaced by robots or machines –, thus combining the DTC and task-based growth literature in an unified framework. This model produces positive relationships both (i) between the relative supply of high-skilled workers and the skill premium and (ii) between automation and wage polarization. Moreover, within the model, we analyse Lobbying as an activity that can affect the wage distribution and integrate it in the strategic interations between firms. We find that it can reduce the effects of automation on wage polarization, and through this channel possibly affecting the wage distribution without affecting the skill premium.

This paper hypothesizes that the structure of macroeconomic governance with its financial and non-financial dynamics is, among other things, a key determinant of economic performance, taking the case of the United States from 1952Q1 to 2018Q4. The paper tests its hypothesis by developing three modes of macroeconomic governance based on complementarities and a time-series model to be used for the empirical analysis of these modes and by using a linear and nonlinear Autoregressive Distributed Lag cointegration model. In so doing, the paper compares five periods between 1952Q1 and 2018Q4 using the same time-series model to illustrate how the changing structure of macroeconomic governance affects long-term economic performance over time. The paper reaches three conclusions. First, higher economic performance in 1952Q1–1968Q3 originates in, among other things, a systemic mode of macroeconomic governance. Second, lower economic performance in the three sub-periods between 1968Q4 and 2008Q2 is due to a fragmented mode of macroeconomic governance. Third, the sharp decline in economic performance in 2008Q3–2018Q4 originates in the outbreak and deepening of a structural trap due to long-run structural fragmentation.

This paper analyses medium-term labour market trends from 1983 to 2018 in Italy relying on the “Rilevazione dei contratti di lavoro” from INPS archive which provides information on average salaries by professional category, age, gender, and geographical origin. Within an overall pattern of exacerbated wage inequalities, documented by means of different indicators, the empirical analysis highlights how the within-component of the wage variation prevails in the gender, age and geographical dimensions. By contrast, the between-component in terms of professional categories (trainees, blue-collar jobs, white-collar jobs, middle managers, executives) is the only between-variation attribute to prevail, corroborating the role played by a reduced class schema, excluding capitalists and the self-employed, in explaining wage inequality. Regression-based inequality estimations confirm the role played by managerial remuneration, the contradictory located class, in driving divergent patterns. Stratification of wage losses is recorded to be largely concentrated among blue-collar professional categories, women, youth, and in Southern regions.

As global emissions increase with global trade, there is a critical need to understand the importance of energy use in export-oriented manufacturing activities in emerging economies. We investigate this issue by examining whether the extent of firms’ involvement in exporting is associated with the energy-intensiveness of their production activities. We use data from a survey of Chinese firms, officially classified as users of ‘advanced’ technologies. Although in recent years China has been attempting to discourage exports of energy- and pollution-intensive products, our results show a positive association between firms’ energy-use intensity and their exporting. This relationship exists across industries with different levels of technological sophistication, but is particularly salient in industries characterized by high energy-use intensity. We discuss the theoretical and policy implications of these findings.

The institutional literature suggests that long-term tax incentives are crucial for entrepreneurs, but studies on this topic are hampered by problems related to how to define and measure entrepreneurial income. We resolve these problems by drawing on a theoretical definition of the entrepreneur as an owner, which enables us to identify entrepreneurship empirically by means of investments made by active owners of closely held corporations. Using detailed Swedish tax data, we analyze the tax incentives for such owner-entrepreneur investments from 1862 to 2018, thereby highlighting the evolution of a general institutional phenomenon through a long-run, in-depth, country-specific analysis. We calculate the annual marginal effective tax rate (METR) on capital income for investments, distinguishing between average- and top-income entrepreneurs, and between three sources of finance. We identify five tax regimes that indicate substantial differences in institutional quality over time according to the magnitude of the METR and METR differences between average- and top-income entrepreneurs and across sources of finance. Growth-conducive tax incentives shed light on why so many successful entrepreneurial firms were founded in Sweden around 1900, whereas increased taxation helps explain the absence of new large entrepreneurial firms in Sweden after World War II. Improved incentives can be associated with Sweden’s recent entrepreneurial renaissance.

This paper aims to investigate the relationship between external imbalances and poverty in the Eurozone. The former are registered through the Target2 (T2) settlement mechanism and can be assimilated into changes in official reserves to cover the balance of payments disequilibrium in a fixed exchange rate regime. The presence of T2 discrepancies has led to differences in interest rates and increased distances in general living conditions inside the Eurozone. An empirical investigation implemented in 11 Eurozone countries reveals that T2 is negatively correlated with poverty, therefore allowing for an interpretation that approximates balance of payment crisis models. Results that appear to be robust to several control variables suggest that the policy framework of the Eurozone—in the absence of a compensatory mechanism—should be revised towards centralised fiscal instruments and anti-speculative monetary interventions.

Technological change is a central concern for evolutionary economics, which combines detailed empirical studies and conceptual frameworks with mathematical modeling, among them the NK model from evolutionary biology. Technological change is also a central concern for classical and Marxian economics, where it is studied under the rubric of “cost share-induced technological change.” Among the contributions from classical economists is a classical-evolutionary model first introduced by Duménil and Lévy. This paper strengthens the classical-evolutionary model’s microeconomic foundations by deriving it from an underlying NK model. The result is an aggregate model suitable for macroeconomic analysis that is grounded in evolutionary microeconomic theory. This explicit micro-to-macro link opens avenues for further research. The paper presents new results for the classical-evolutionary model, including a “generating function” method for creating candidate functional forms, and provides three illustrative applications.

The identification of the full range of ingredients of the Schumpeterian dynamics enables to contribute the analytical framework of evolutionary complexity. According to this Schumpeterian perspective, broad societal transformations, as the opening of international trade, can be viewed as the causes and consequences of the Schumpeterian creative response that enables economies to cope with the rapid and radical change of product and factor markets by means the introduction of innovations. Innovations support the increase of total factor productivity (TFP), however, only if, when, and where new technological knowledge could be generated at costs below equilibrium. The econometric evidence of 14 European countries in the years 1990–2016 shows that a larger country’s trade openness increases the TFP both directly, from market selection, and indirectly, from greater innovative efforts that were stronger the lower the unit patent costs.

Financial services are enduring a profound transformation. Disruptive technologies are rewiring the broking, insurance, payment, lending and wealth management services. Fintech innovations are reshaping economies and societies by democratizing financial services. Digital payment services, crowdfunding, crowdlending, digital currencies, online discount broking and Robo-advisory services are extending financial services to the unserved segments of society through low-cost innovative solutions. Although fintech has attracted a lot of media attention, however, there is a dearth of literature on the effect of financial technologies on the overall economic outlook of economies. The present book explores the economic and social impact of fintech services. This book offers a research-based view of fintech?s potential impact on fostering greater financial inclusion and reducing economic inequality. JEL Codes G11 · G2 · L1 Financial services have experienced a massive mutation over the last decade (Tao et al. 2022). Disruptive technologies are rewiring financial services such as insurance , payment, lending, and wealth management. Fintech innovations are reshaping economies and society by democratizing financial services. Digital payment services, crowdfunding, crowdlending, digital currencies, online discount broking, and robo-advisory services are extending financial services to the unserved segments of society

Based on a historical case study, this contribution develops a framework for studying the industrial dynamics of complex products and systems (CoPS). The case study focuses on the spacecraft industry from 1957 to 2011. It is suggested that the main drivers of the dynamics of this typical CoPS industry are changes in long-term demand behavior. The main hypothesis formulated in this contribution states that customers' purchasing policies are underpinned by a set of heterogeneous motives (i.e., defense and security, political prestige, science and technology, macroeconomic benefits and profit-seeking) that evolve over time in response to changes in contextual variables. Within this framework, the paper examines the long-term relationships between customer motives on the one hand and the size (i.e., number of spacecraft launched) and segmentation (i.e., application domains of space technology) of the spacecraft market on the other hand. It shows that the dynamics of spacecraft industry resides on changes affecting customers’ motives, the latter behaving as lead users of a particular type. Indeed, customers are organizations and institutions which contribution to technological development goes far beyond bringing technical and non-technical, market-oriented, knowledge and competencies through collaboration with firms. In doing so, the paper proposes a conceptual framework based on the characterization of customer motives to study how demand behaviors affect the dynamics of CoPS industries.

“Questioning the Entrepreneurial State: Status-quo, Pitfalls, and the Need for Credible Innovation Policy.” Although each chapter tackles a different question related to the entrepreneurial state, there are several underlying themes urging readers to view the entrepeneurial state with caution: (a) States cannot adequately capture and innovate upon localized and decentralized knowledge, (b) states do not punish wasted resources and reward creativity in the same way that markets do, and (c) experimentation and learning is only possible within a market system.

The paper shows how the standard two-period CAPM with exogenous wealth and exogenous returns can be extended inter-temporally by including the evolution of wealth from the Evolutionary Finance model of Evstigneev et al., J Math Finance 12:329–339, (2011). The missing link between the two models is the CAPM with heterogeneous behavior derived by Hens and Naebi, J Appl Econ Lett 28:501–507, (2020). The paper delivers theoretical and empirical results for behavioral heterogeneity in the CAPM with evolutionary dynamics. The market selection process results in a beta based on fundamentals to which the standard beta tends to converge asymptotically. The results of our model are confirmed by data from the DJIA.

Low inflation was once welcomed by both policymakers and the public. However, Japan's experience during the 1990s changed the consensus of economists and central banks around the world regarding prices. Facing deflation and the zero-interest bound at the same time, the Bank of Japan had difficulty conducting an effective monetary policy, making Japan's stagnation unusually prolonged. The too-low inflation that concerns central banks today translates into the "Phillips curve puzzle." In the United States and Japan, in the course of the recovery from the Great Recession after the 2008 Global Financial Crisis, the unemployment rate had steadily declined to a level commonly regarded as lower than the natural rate or NAIRU. However, inflation remained low. In this paper, we consider a minimal model of the dual labor market to jointly investigate how the different factors affecting the structural evolution of the labor market have contributed to the observed flattening of the Phillips curve. We find that the level of bargaining power of workers, elasticity of the supply of labor to wage in the secondary market, and composition of the workforce are the main factors jointly explaining the evidence for Japan. Supplementary information: The online version contains supplementary material available at 10.1007/s00191-022-00781-8.

Sensing customer needs capabilities generally help firms to utilize customer feedback. Yet, as research linking micro-economics to industrial dynamics has shown, a strong focus on such feedback may prevent an adequate response to more promising market developments. We analyse this tension for firms providing customized services, whose innovativeness heavily depends on customer input. By drawing upon an NK search model, we simulate various interactive search strategies. Our simulations result in hypotheses concerning the strategies’ relation to innovation-based turnover. We use survey data from 292 firms to substantiate our expectations empirically. Both our simulation and regression results point to a positive influence on turnover of sensing customer needs and of customer feedback. While the interaction effect is positive for non-customizing service providers, it is negative for their customizing counterparts. The latter group may fail to exploit their inventiveness, as they concentrate on tuning new services to the specific needs of existing customers rather than turning them into more widely marketable innovations.

This paper deals with the relationship between individual preferences and the use of cash. Building on insights from economic and psychological literature, we present an agent-based model simulating consumers’ behaviour when choosing which mean of payment to use, according the value of the transaction. Assuming heterogeneous preferences for mean of payment, results show that the number of cash transactions and their value strongly depend on both the consumption and the preference structure. Results are validated with EU countries’ data, considering different national policies adopted on the cash usage.

The Allais paradox constitutes a central violation of the expected utility paradigm. The paradox is typically explained by subjective probability weighing, and has motivated and shaped the leading non-expected-utility models. But why do people weigh probabilities? We suggest a new explanation for the Allais paradox based on evolutionary theory. We show that the evolutionary goal of maximizing the probability of having descendants forever (i.e. minimizing the probability of eventual extinction) predicts the Allais paradox and the common-consequence and common-ratio effects, and thus provides a rational-expectations theoretical foundation for the experimentally observed behavior.

Industry 4.0 technologies are gaining strong momentum and thrust around the globe. These technological advancements are disrupting every sphere of human life. The financial sector is not an exception. Banking, finance and money are witnessing a wave of transformation. The advent of cryptocurrencies, sovereign digital currencies, and efficient digital payment systems are moving economies towards cashless societies. Challenger banks, discount brokers, Robo-advisors, crowdfunding and p2p lending platforms are challenging the traditional financial institutions through cost-effective and personalized financial services. Decentralized finance through smart contracts and decentralized autonomous organizations aims to offer direct peer to peer financial services by "cutting out the traditional intermediaries". Although at first glance, these financial innovations seem to be a potential solution for inefficiencies in traditional finance, detailed evaluation of these financial innovations reveal that these innovations can bring unknown financial and non-financial risks. The present book is an initial step for economists, academicians, policymakers, and entrepreneurs who want to understand contemporary and ongoing financial innovations, the mechanism, and their implications. From the exponential escalation of m-money in China to the on-demand insurance in the advanced countries , the book gives an integrated overview of social, economic and political impli-Eswar S. Prasad (2021): The future of money: how the digital revolution is transforming currencies and finance Belknap press of Harvard University Press, Cambridge Massachusetts, LCCN 2021008025

Organizational routines are a popular field of research dominated by two communities of scholars: the capability community and the practice community. Based on a bibliometric study of 635 peer-reviewed articles, this paper proposes a systematic analysis of the recent contributions to the field made by the two communities. Our findings yield two main insights. First, we show that, even if both communities have been contributing to advancing the scholarly understanding of routines, practice scholars’ research has grown faster than capability scholars’ in recent years. Second, using a Latent Dirichlet Allocation algorithm for text analysis, we identify 33 research topics that have sparked scholars’ interest in the period 2005–2016 and we explore the evolution of key topics. Specifically, we observe that topics characteristic of each community concerned the theoretical foundations of organizational routines and, for practice scholars, also context-related internal dynamics. We also find diverging topics that created gaps between the two communities. For capability scholars, diverging topics pertained to specific aspects of the theoretical foundations, such as dynamic and ordinary capabilities, and the effects of routines. For practice scholars, diverging topics pertained to context-related internal dynamics of routines. These insights provide a comprehensive map of the research landscape illustrating that, even if the communities have maintained parallel conversations, their growing interest could lead to synergies.

This paper studies the relationship between founding team knowledge diversity and firms’ innovative performance. We posit that knowledge diversity entails two dimensions: a team dimension and an individual dimension. In particular, we argue that founding team knowledge diversity can derive both from the presence of founders with different knowledge backgrounds, and from the presence of similar jack-of-all-trades (JOTs). We suggest that knowledge diversity is positively associated with innovation, especially when diversity comes from founders with different knowledge backgrounds, instead of coming from many JOTs. Furthermore, it matters more for firms whose knowledge base is oriented towards technical and scientific applications, as opposed to firms with a generalist, business-oriented knowledge base. We provide support to these propositions relying on a study of 1,800 newly established firms in Europe.

Although it seems almost a stylized fact that females are less likely than males to start new ventures, closing this gender gap is essential to foster sustainable economic growth. In this study, we analyze whether gender inequality, as measured at the country level by the World Economic Forum since 2006, is associated with the gender gap in entrepreneurship. By analyzing country-level information about gender inequality (97 countries) in combination with individual-level data from the Global Entrepreneurship Monitor (1,905,665 individuals) from the years 2006 to 2017, we find that in more gender equal countries involvement in total early-stage entrepreneurial activity (TEA) is higher. Gender inequality moderates the effect of gender on TEA, by almost closing the gender gap in entrepreneurship in the most gender equal countries. We show that gender inequalities in economic participation and opportunity as well as in political empowerment are the main drivers of this interaction effect. We find similar patterns when distinguishing between opportunity-driven and necessity-driven TEA. With opportunity-driven entrepreneurship as a potential vehicle for the economic empowerment of females, our study highlights the role of policies stimulating gender equality.

In this conceptual paper, we discuss the evolutionary root causes of institutional complexity, defined as inherently incompatible prescriptions when different sources of institutions intersect at the same space and time. We suggest that societies are not delineated by clear-cut boundaries, but dynamically evolve along multiple co-existing levels of social lineages, each of which is associated with a given replicator. Institutional complexity thus can be conceived as a mix of potentially conflicting dispositions due to replicators derived from different historically separate social lineages. Decomposing institutional complexity into its evolutionary roots, we identify two types of inherent incompatibility that define institutional complexity: the incompatibilities between co-existing levels of the same social lineage as they evolve, and the incompatibilities between social lineages at the same level as they synthesize after having been separate in history but intersect again at the same space and time. Implications are discussed for future institutional studies.

This work investigates how to prevent sustainable tourism from turning into over-tourism dynamics. As a matter of fact, the former has shown to be capable of bringing profit to traditional rural activities (i.e. agriculture), the tourism sector, the environment and the cultural heritage of a region; whereas the latter, more often than not, harms and brings detriment to the natural landscape. Hereof, landscape heritage is a fundamental resource at the base of both rural tourism (RT) and traditional rural activities, and it is reasonable that to adequately support RT a certain degree of built-up growth (i.e. new accommodation facilities and cognate areas) is somewhat needed. However, we want to problematize that these dynamics shall be carefully calibrated and appropriately regulated in a non-conflictual way. We modeled that: (i) land can be either devoted to RT-hosting facilities or agriculture; (ii) RT impacts landscape resources more harmfully, thus diminishing profitability of both sectors. We also posit a policy instrument to preserve landscape resources, financed through RT revenues. The analysis shows that if no policy is applied, over-RT is ineluctable. Conversely, with such a policy instrument it is possible to determine an economic space where all rural economic activities peacefully coexist, and landscape impacts are minimized.

In this paper we study tax evasion by means of a unified framework, based on a behavioral approach, where each individual decision with respect to tax compliance is driven by either personal evaluations of the available information, correlated to income and the perception of the quality of the public good, and social influences, derived by the known decision of neighbors. Our model relies on individual utility functions and describes the tax-evasion problem by means of a personal evolutionary scheme, in which each citizen dynamically adapts her behavior as a response to changing economic and social factors. We will show basic economic intuitions on the relevance of penalties, imitation, satisfaction and risk aversion by means of an analytical model and its agent-based companion version, in order to analyse different elements influencing tax evasion and their dynamic effects. In particular, it is shown how the tax-evasion probability changes as a function of the risk-aversion and specific focus is dedicated to the role played by non-monetary elements of utility in inducing high levels of tax compliance also at substantially reduced fines.

In this paper we consider a population of would-be migrants in a developing country. To begin with, this population is divided into two sets: those who save by themselves to pay for the cost of their migration, and those who pool their savings with the savings of another would-be migrant to pay for the cost. Saving jointly brings forward the timing of migration: funds needed to pay for the migration of one of the co-savers can be accumulated more quickly, enabling him, using his higher income at destination than at origin, to speed up the migration of his co-saver. However, people may hesitate to save jointly for fear that a co-saver who is the first to migrate might fail to keep his part of the agreement. We show that an increase in the cost of migration stimulates the formation of co-financing, joint-saving arrangements that enable would-be migrants to cushion the impact of the increase. The evolution of joint-saving arrangements can create a time window during which the intensity of migration need not decrease: no fewer people (and conceivably even more of them) will migrate during a time interval that follows the increase in the cost. This prediction is at variance with the canonical economic model of migration according to which if migration is costlier, then there will be less of it.

Innovation and new ideas often arise in contexts that are more conducive to the recombination of existing knowledge. I use data from hip hop chart rankings and YouTube video views to uncover patterns of this recombination and measure their impact in a cultural setting. This genre of music is used because, more than others, it has the custom of explicitly featuring guest artists and samples of existing songs. These processes provide a quantifiable measure of the extent of recombination of existing knowledge in the new songs’ creative process. I find that songs that more explicitly rely on recombination have greater impact. The results suggest that the more successful songs include not just novelty, but novelty together with elements of conventionality. This is in line with other analyses of innovation and impact in other creative industries. The propensity for recombinant strategies to uncover valuable innovation depends on the geographic, institutional, cultural and network structures where this search takes place. Hip hop music, through its explicit use of features and samples, illustrates some characteristics of successful recombinant innovation that can be extended to other genres and creative industries.

Wage employment is the most commonly observed type of employment after a spell of entrepreneurship. The purpose of this paper is to investigate the effects of having been an entrepreneur on earnings after individuals exit. The question is how the entrepreneurship spell influences their value in the labor market? Based on a theoretical framework and earlier literature, our specific interest lies in how these outcomes interact with education level and the nature of the entrepreneurial venture. To investigate this question, we use longitudinal register data on firms and individuals in Sweden. The empirical strategy builds on matching techniques and estimations of earnings equations in a difference-in-differences framework with heterogenous treatment years. We provide evidence that there exists an earnings penalty when highly educated entrepreneurs return to wage employment. This effect is persistent throughout the time period that we observe. For individuals with lower educational attainment, we find no or weak evidence of a wage penalty. Our results suggest that the wage penalty for highly educated individuals operates through the depreciation of specific specialized skills valuable in wage employment.

Differentiating various types of entrepreneurs provides clues to the puzzle of why vertical or top-down policies often fail to create Schumpeterian entrepreneurship and the ecosystems where it thrives. Schumpeterian entrepreneurship is intrinsically contrarian, whereas public policy has a bias toward incremental innovation and replication of past success. If central planners knew what the next radical innovation would be, there would be no need for Schumpeterian entrepreneurs. Schumpeterian entrepreneurs create not only companies but also institutions in the entrepreneurial support system. These ever-evolving structures are too complex to design, and central planning instead reduces the space for organic institutional innovation.

This article contributes to the literature on central banks' institutional rationale and evolution by analyzing the early development of the Bank of England as a case study. The history of the Bank is scrutinized under the framework of entangled political economy, revealing its origins in a process of bank and political bargains. The account clarifies the process by which the political and economic order becomes increasingly intertwined throughout the banking system, via political bargains under incomplete contracts. The analysis suggests that entanglement allows governments and non-profit organizations to transmit some of their features to banking organizations in exchange for financial benefits. Transmitting nonmarket characteristics through recurrent bargains leads a for-profit bank to gradually transform into a central bank. The article proposes an alternative rationale for the unintended emergence of central banks, providing evidence in favor of their politically oriented development, rather than their alleged intrinsic nature.

This study investigates the dynamic evolution of the innovation systems of two industrial regions in Asia, namely, Hsinchu in Taiwan and Suwon in Korea, including their respective core firms, TSMC (Taiwan Semiconductor Manufacturing Company) and Samsung. Patent data analysis shows that the regional innovation system (RIS) of the two regions is different from the peripheral or immature RIS characterized by a high reliance on foreign knowledge resources. Hsinchu and Suwon have achieved an upgrade in terms of increased localization, technological diversification, and science-basedness, obtaining a high level of knowledge convergence (originality). This upgrade is accompanied by the enhancement of the core firms’ technological capabilities, confirmed by the increasing trend of self-citations and the decreasing citations of foreign-held patents, as well as increasing localization and diversification of the surrounding region excluding the core firm. Furthermore, Hsinchu is more comparable to a Marshallian innovation system than Suwon because of its higher degree of knowledge localization and intraregional collaboration and less concentration than the latter. Recently Hsichu tend to show some signs of increasing concentration. This finding implies that both regions converge to an HaS structure but with the path-dependent persistence of the initial differences between this structure (Suwon) and a Marshallian one (Hsinchu).

A recent study examined the effects of both dynamic (between-substance) and static (within-substance) competition on prescription drug prices in the U.S. It showed that the 1985–2005 increase in between-substance competition reduced the average 2017 U.S. price of drugs that were already sold in 1997 by 35%, and that, due to this price reduction, 36% of 2017 expenditure on drugs that were first registered during 1986–2005 was offset by reduced 2017 expenditure on drugs that were sold in both 1997 and 2017. This study uses similar methods to examine the effect of both between- and within-substance competition on drug prices in Denmark. Drug prices are 60% lower in Denmark than they are in the U.S.; per capita drug expenditure is 74% lower in Denmark than it is in the U.S. Our estimates indicate that the 1997–2017 increase in between-substance competition reduced the average 2017 price of “old drugs” (drugs already sold in 1997) by 18%. This price reduction was 60% as large as the price reduction due to the increase in within-substance competition. We estimate that 24% of 2017 expenditure on drugs that were first registered during 1986–2005 was offset by reduced 2017 expenditure on drugs that were sold in both 1997 and 2017. The effect of between-substance competition on drug prices should be recognized by both health technology assessment decisionmakers and antitrust authorities.

This paper deals with the Secular Stagnation in productivity growth that marks the US economy since the end of the Golden Age. I contribute to the understanding of this phenomenon proposing a theoretical and empirical analysis. On the theoretical side, I develop an agent-based, stock-flow consistent model to investigate the deep relationship between functional income distribution and productivity through the channel of innovation. Findings suggest that the continuous shift of income from wages to profits may have resulted in a smaller incentive to invest on R&D, with the corresponding decline in productivity growth that characterizes US Secular Stagnation. In this respect, a social compromise between workers and capitalists in terms of higher wages helps foster innovation and economic growth, but it does not necessarily entail significant improvements in terms of income concentration, because of higher unemployment rates. Additionally, I question the neoclassical belief on the negative interest-elasticity of investments, since decreases in the rate of interest are not associated with increases in capital accumulation, but they decrease income inequality through higher employment rates. On the empirical side, this paper presents a panel cointegration analysis on US manufacturing industries for the period 1958–2011. If, on the one hand, the linkage between R&D and wages is corroborated, on the other hand, I find the lack of any long-run relationship between innovative search and the rate of interest, which does not necessarily conflict with theoretical predictions.

In the paper, we examine the relationship between the diversity of a competitive economy and the mechanisms that appear within economic development. We use the concept of transformation of the economic system to analyze innovation in the economy. A properly defined diversity function allows us to measure the diversity of the production system of a given economy as well as to relate the obtained value to certain properties of the mechanisms of economic evolution defined in the Hurwicz conceptual apparatus. We show that innovative mechanisms and eco-mechanisms can increase the diversity of the analyzed economic system. The conclusions are the results of mathematical theorems.

This paper relates cultural distance and governance structures. We suggest a model of cultural evolution that captures the idiosyncratic socialization dynamics taking place in groups of communicating and interacting agents. Based on these processes, cultural distance within and between groups or organizational units develops. Transaction cost theorists associate higher cultural distance with higher transaction costs. Therefore, one problem of economic organization is assessing alternative governance structures in terms of the socialization dynamics they enable that entail different intraorganizational transaction costs. Socialization governance structures that can be used to affect cultural distance among employees include shared social experiences in groups, the assignment of influential role models, group sizes, the recruitment of employees presocialized in certain ways, the recognition of specific cultural dimensions such as “individualism” or “collectivism”, and the implementation of cooperative cultures in business units. These yield organizations differential capacities to adapt internal structures in transaction cost-minimizing ways.