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A Geometry of Innovation (with Friedrich Geiecke) [updated version coming soon]
We use modern methods from Natural Language Processing (NLP) to characterize the innovative content of patents. We elaborate the concept of widening innovations, which are patents whose textual content is different from existing patents at the time when they are filed and similar to patents subsequently filed. The term “widening'' reflects the idea that these patents extend knowledge in a novel way and spur innovation. The computations of patents' similarities rely on numerical representations of the textual content of patents. We show that widening patents have higher citations and the firms owning them make higher profits and grow faster relative to other firms, although causality between filing such a patent and firms' performance cannot be established. Unsurprisingly, many widening patents stem from the IT revolution, a field near-non-existent in the 1980s which became predominant in the innovation landscape.
Work in Progress
Industry Concentration Patterns in the United Kingdom
Industry concentration has significantly risen in the US across all broad sectors. Many explanations have been put forward to explain this rise in concentration. One view is that the nature of competition has changed, promoting a "winner-takes-all" environment where few efficient and innovative large firms reap most of the market shares, either due to globalization and/or to difficulty-transferable technological superiority. Another view argues that lax anti-trust policies may have allowed the rise and dominance of large firms that use their market power to dwarf competition. This paper uses administrative data from the UK to (i) document in detail concentration patterns in the UK across sectors and regions from 1973 to 2018; (ii) attempt to shed light on the likely determinants of concentration in the UK, focusing on the explanations put forward in the literature. To detect potential changes in competitivity, specific attention is paid to Mergers and Acquisitions and anti-trust activities intensity, as well as measures of productivity and innovation at the firm level.
Tariff Evasion: Evidence from the US Trade War
I study tariff evasion in the context of the trade war that currently opposes the US to the rest of the world. One concern in the literature on tariff evasion is reverse causality, i.e. that the levels of tariffs are set based on the likelihood of evasion. The trade war offers an appealing opportunity because tariffs were set with a clear political agenda, which arguably reduces concerns of endoegeneity. I indirectly measure tariff evasion based on the reaction of bilateral asymmetries in trade statistics in response to changes in tariffs, a method widely used in the literature, using the tariffs hikes in the US and the retaliatory responses from China, Mexico, Turkey, the European Union, Canada and Russia as source of exogenous variation. I study bilateral asymmetries at the monthly frequency in an event study framework in which the events are the successive waves of tariffs increase. Data is becoming available at present, and the ongoing trade war offers more episodes of interest as time goes by.
VAT Fraud: Evidence from within-EU trade
Value Added Tax (VAT) revenues represent around 17% of tax revenues in the EU (Eurostat). Every year, significant amounts of VAT legally owed are evaded. In 2017, 11% of the theoretical VAT liability was evaded, amounting to EUR 137 billion of revenues lost. The specific institutional features of the European Union Single Market gave rise to one type of criminal scheme called the Missing Trader Intra Community (MTIC) fraud which is believed to account for a large fraction of VAT revenue losses, whereby imports purchased VAT-free are sold domestically and the VAT on that sale is not remitted to the tax authorities. To combat this type of fraud, the EU elaborated several measures, one of which is called reverse-charging, which passes the liability for VAT onto the buyer, removing the ability of the importer to engage in MTIC fraud. The aim of this paper is to estimate the actual importance of MTIC fraud in the EU. I study the introduction of the reverse charge mechanism through bilateral trade asymmetries: whilst exporters report their exports, the MTIC fraudster disappears before reporting the import, affecting trade statistics. I use the reaction of bilateral trade asymmetries to the introduction of the reverse charge mechanism to gauge the importance of MTIC-type frauds using all such events in the EU.