(NEW) Acquisitions, Inventors' Turnover, and Innovation: Evidence from the Pharmaceutical Industry (joint with L. Cassi)

Abstract: There is robust evidence that M&As in the pharmaceutical sector have a negative impact on firms' patent output. In this paper we use data from the European Patent Office to investigate whether this decrease in patenting observed at firm level is associated with a halt in inventors’ activity - i.e. human capital loss due to inventors’ exit- or rather a migration of inventors of target firms to other research labs - i.e. human capital reallocation due to inventors’ departure. We estimate that acquisitions are associated with an increase in exit rates of targets’ inventors between 6 and 15 percentage points and of their departure rates ranging from 12 to18 percentage points. We find similar results are obtained for large and small deals and that top inventors of targets are also more likely to exit or to leave when an acquisition takes place. Our results show that, for each inventor that exits, 3.5 patents are foregone: a loss of 35 percent of the expected output these scientists could have produced over their careers. Inventors who relocate to a different lab also generate 2 fewer patents compared to similar control scientists, representing a 30 percent decrease in their productivity. Our finding suggests that concentrations are associated with a substantial loss in both worker and consumer welfare. PDF

(NEW)Production Function, Market Power and Rent Sharing: Lessons from Hybrid Industrial-Labour Economics   (joint with J. Tong)

Abstract: In this paper, we build a theoretical model of imperfect competition in both product and labour markets, featuring heterogeneous firm productivities, and use it to guide empirical identification of parameters of production and labour supply functions as well as market power indices. Our methodology offers novel treatments to three stringent assumptions of the cost share approach `a la Solow (1957): (1) perfect competition in all markets, (2) constant returns to scale (CRS), and (3) Cobb-Douglas production function. To address (1), we show that the ratio between output elasticities of intermediate and labour inputs can be recovered from a subset consisting of competitive fringe firms. For (2) we provide theoretical and empirical evidence to support the notion of a short-run production function characterised by CRS. For (3), we augment the Cobb-Douglas production function with a correction term that captures the effects of firms’ buyer power and workers’ countervailing seller power in labour market. We validate our novel methodology with a panel of UK manufacturing firms, and show that our methodological innovations in (1)-(3) are all relevant in delivering new substantive findings. PDF. 

Technology vs Information to Promote Conservation: Evidence from Water Audits (joint with E. Ansink and M. Tonin)

Abstract: We study the impact of audits on water conservation, distinguishing between the information and technological components. We observe water consumption for thousands of households in the South East of England for up to 18 months after they receive a visit of a so-called Green Doctor. We observe a decrease in water usage between 7.5 and 10 litres per day for each water-device and we find that this effect is persistent over 18 months. Devices reducing water pressure are particularly effective, while shower timers are ineffective. The information component of the water audit has a large initial impact of around 40 litres per day, but this effect gradually fades away over time, until it stabilizes to around 10 litres per day. Technology appears to be more cost-effective than information provision and this can help in the design of policy interventions.  PDF