Project participants: Prof. Stefan Karner, Dr. phil., Dr. h.c., and Prof. (ret.) Dr. Richard Sturn (project leader), Lukas Starchl, BA (Econ.), M.Sc. (Econ.)

Grant amount: EUR 249,000.00 – Austrian National Bank Anniversary Fund

Duration: 1 December 2022 to 30 November 2025

At the heart of the project is a systematic, comprehensive review of extensive archive holdings – which have so far been only partially analysed, have been stored in Moscow for decades and were discovered by the project leader – that document the work of Ludwig von Mises, particularly during the interwar period. As part of the project, the entire collection of documents is also to be digitally catalogued and made available to researchers in digital form under the auspices of the Graz Schumpeter Centre at the University of Graz.

Click here to visit the project’s dedicated website.

Grant amount: 398,883.25 (FWF – Austrian Science Fund)

Project start date: February 2022

Project leader: Univ-Prof. Dr Christian Gehrke

Project team members:
Patrick Mellacher, B.A. (Econ.), M.Sc. (Econ.), Dr. rer. soc. oec.
Teresa Lackner, B.A. (Econ.), M.Sc. (Econ.)
Magdalena Rath, Bakk.phil., BSc
Simon Plakolb, BSc, MSc

 

The COVID-19 pandemic has made the general public aware of how important epidemiological models are for predicting the spread of infectious diseases and estimating the economic consequences. A particularly well-suited method for this is the use of so-called agent-based models. These computer simulations are firmly established in epidemiology and are also being used to an increasing extent in economics. However, they remain significantly under-represented at the interface between the two disciplines, known as economic epidemiology. One of these few approaches, entitled ‘COVID-Town’, was developed by Patrick Mellacher at the Graz Schumpeter Centre at the University of Graz. This model makes it possible to simultaneously simulate the economic and epidemiological consequences of the coronavirus under various policy scenarios, placing particular emphasis on the heterogeneity of the population in terms of its economic, social and epidemiological characteristics. In this project, agent-based models are being developed and applied to new research questions: How does a more complex modelling of epidemiological dynamics affect policy recommendations? What consequences and dynamics arise from so-called ‘corona scepticism’? What socio-economic consequences of the crisis can be expected for different population groups, and in particular for women, in the short and longer term?

Click here to visit the project’s dedicated page.

Grant amount: EUR 197,000.00 (OeNB Anniversary Fund)

Project start date: 1 November 2020 – 31 March 2023

Project leader: Univ-Prof. Dr Richard Sturn

Project team members:
Carolina Lennon, PhD in Economics, MSc, BA;
Marlies Schütz, Dr Bakk.rer.soc.oec. M.A. (Econ.)
Laura Zilian, BSc, MSc.
Stella Zilian, B.A. (Econ.), M.A. (Econ.)

Although there is no consensus on the extent to which artificial intelligence and robots can replace human labour, the number of empirical and theoretical studies pointing to significant shifts in the structure of employment is growing. Although studies are increasingly focusing on analysing the growing automatability of ever more complex tasks, there are few studies that examine the short-term consequences for workers. To close this gap, we are developing an agent-based model to investigate current labour market dynamics. At the heart of the model is the incorporation of digital skills, which enables us to simulate (mis)match situations. This analysis aims to inform policy-makers about the impact of the digital revolution on the employability of various groups within the Austrian workforce.

Economic studies suggest that the digital revolution is driving structural changes in employment. However, little attention has been paid to the short-term consequences for individuals to date. In this project, which brings together economics, media studies and information science, we are expanding the research by modelling labour market dynamics based on the supply and demand for digital skills. Furthermore, two indicators for measuring digital skills in the labour market are being developed, and scenarios are used to examine the impact of unevenly distributed skills on the employability of different groups of people. Finally, microdata will be used to analyse the ‘unemployment–employment’ transition dynamics in order to validate the results of the ABM and to obtain stylised facts about the distribution and trends of digital skills. In addition, potential at-risk groups whose jobs are threatened by new technologies will be identified.

To examine unemployment against the backdrop of the digital revolution, we will develop an agent-based model (ABM) to analyse the supply and demand for digital skills and the resulting (mis)match. The model will be calibrated and validated using data on digital skills within the Austrian labour force. We will develop two indices to measure the occupational requirements for digital skills at the lowest hierarchical level of ISCO-08, applying, amongst other methods, text-mining algorithms, network analysis and revealed comparative advantage analysis. For model calibration, we will use data on registered job vacancies from the Public Employment Service. With the help of the EU Labour Force Survey (LFS), we will assess the supply of digital skills by occupation. Finally, we will use microdata on the transition between unemployment and employment in Austria to validate the key findings of the ABM.

Supported by funding from the Province of Styria as part of the series ‘Polarities in the Knowledge Society – (Un)Shared’

Grant amount: EUR 92,000.00

May 2018 to February 2021

Co-operating partners: Institute of Sociology, Institute of Labour Law, Institute of Economics, Institute of Systems Sciences, Innovation and Sustainability Research (all at the University of Graz), ISCTE – Universidade de Lisboa, EHESS Aix-Marseille University 

The digitalisation of society and the economy in particular represents a social and economic innovation in many respects – it is not without reason that digitalisation is often referred to as the fourth industrial revolution, a foundational innovation that will fundamentally influence the way we live together, conduct business and the legal framework, just as the steam engine once did. Such fundamental changes in a globalised world, where effects are rapidly felt through the international movement of people and companies, call for a scientifically grounded, interdisciplinary examination.

Increasing digitalisation creates new opportunities, but also poses challenges for large sections of the economy and society – including in Styria. The creation, availability, dissemination and use of knowledge and information are undergoing significant transformation. This has far-reaching implications not only for consumers and employees but also for the economic potential of entire regions, right down to the requirements for institutional and legal frameworks.

This project aims to highlight the effects of digitalisation – particularly for Styria and the local labour market – from an economic, sociological and legal perspective, and to contribute proposals for necessary adjustments to economic policy.

FWF Project P 30434-G27

Funding amount: EUR 402,098.55

Duration: 2017–2020

 

Project topic: Milestones in the fields of robotics and artificial intelligence are laying the foundations for a new wave of digitalisation and full automation. The key technology here is smart machines, such as cyber-physical systems (CPS), which enable interaction between the physical and virtual worlds and thus the full automation of production processes. CPS, as pioneers of digital transformation, are already regarded as the next ‘General Purpose Technology’ (GPT) – a foundational technology that affects the entire economy and triggers far-reaching structural change. In particular, lasting consequences are expected for the labour market and the education sector, as, for example, existing occupational fields may need to be adapted or may disappear altogether. Furthermore, the transition to the new production system depends heavily on an economy’s capacity to develop new technologies and to adapt to the use of these new technologies. The latter plays a central role, particularly for small, open economies such as Austria, as international trade facilitates the adoption and diffusion of foreign innovations – an aspect that has so far been virtually ignored in the relevant literature. Furthermore, the institutional and political framework also plays a key role, as the scope and nature of the measures implemented can have a significant impact on the development and adoption capacity of new technologies.

This project aims to examine the economic potential and challenges associated with the diffusion of smart machines and other closely related radical innovations. To this end, a systemic approach incorporating analytical models and empirical research will be employed to analyse the extent to which Austria’s economy is prepared for the digital transformation.  The project topic is highly topical in view of the transformative potential inherent in digital transformation and full automation, as well as the associated challenges and opportunities for Austria’s economic development.

Market-fundamentalist patterns of argument and their persistent influence on economic and legal policy

Supported by funding from the Province of Styria as part of the series ‘Polarities in the Knowledge Society – The Persistence of Stereotypical Patterns of Argumentation’

Grant amount: EUR 92,000.00

Duration: 2015–2017

 

Market fundamentalist patterns of argumentation have, since the 1980s, once again become firmly established in political discourse at various levels. Market fundamentalists assert that a market free from intervention and self-regulating is necessary for efficient allocation, innovation and freedom. This argument is based essentially on the exaggeration and the disregard of the practical limitations of certain core economic principles, such as the free contract principle, Ricardian equivalence, the crowding-out effect—including the associated thesis of policy inefficiency—and the Coase theorem. These form the basis for comparatively simple lines of argument which, when applied to a wide range of economic policy issues, have the potential to put opponents on the defensive. This project undertakes an empirical and historical reconstruction of the development of these market-fundamentalist lines of argument within political discourse and analyses the reasons for their persistence in the political process.

Supported by funding from the Austrian National Bank’s Anniversary Fund (project number: 15482)

Grant amount: EUR 70,000.00

Duration: 2014–2018

This project follows on from OeNB Project No. 13372 and builds upon its findings. The focus is on the economic development of the countries of Central and Eastern Europe since the mid-1990s. The collapse of communism, integration into the European Union and the ongoing process of globalisation have led to far-reaching changes in the economic structure of the countries under study, and these will be examined from both a theoretical and an empirical perspective.

One aim of this project is, on the one hand, to highlight structural change at the sectoral level and, on the other, to examine similarities and differences in the economic dynamics of the individual countries. As in the previous project, both a specialisation analysis and a concentration analysis will be carried out.

A further aim of the project is to continue the analysis of various indices used to measure specialisation and concentration. To this end, the number of indices used will be expanded, and the variation in empirical results arising from the use of different indices will be examined.

An evolutionary approach to technical change

FWF Project P 24915-G11

Grant amount: EUR 330,435.00

Duration: 2012–2016 

Technical progress takes many different forms. Joseph A. Schumpeter identified five distinct forms, which include: (1) the introduction of a new product, (2) the introduction of a new production process, (3) the emergence of a new market, (4) the use of new resources or intermediate goods, and (5) the introduction of new forms of organisation. This project examines the dynamic properties of economies in the event of exogenous technological shocks, characterised by the introduction of new production processes. When technological progress occurs, the question arises as to what characteristics the transition path of an economy exhibits as it moves from one steady state to another. Using Leontief production functions, producers in this context are confronted with a dual (or multiple) technology-selection problem between two or more production processes. The resulting transition path, which links two different long-run steady states, is constructed by applying both evolutionary economic approaches and classical economic approaches. Initial attempts to combine these two research strands were made by Steedman and Metcalfe (2011).

The aim of this FWF project is to advance research in this direction. Four distinct but interrelated research tasks aim to deepen our understanding of the dynamic properties of economic systems influenced by the occurrence of technological progress. The first part provides a literature review of existing approaches to the dynamics of economic systems. In particular, the focus is on Schumpeter and his theory of innovation (Schumpeter 1912, 1961, 2005), as well as on institutional approaches such as those developed by Thorstein Veblen (1898, 1924). Combining these different theoretical approaches with empirical and theoretical findings from diffusion theory (Rogers 2003) enables the modelling and simulation of economic diffusion processes. Tasks 2 and 3 combine classical economic theory with evolutionary economics. More specifically, the second part examines single-sector model economies. In contrast, the third part considers inter-sectoral feedback effects through the analysis of multi-sectoral models. In doing so, a detailed theoretical framework is developed which can subsequently be applied for practical purposes in the field of political economy. As examined by Rogers (2003), both formal and informal institutions (in the sense of North 1990) are decisive for the nature of diffusion processes of new technologies. Since technological progress also has a significant influence on socio-economic issues (Rogers 2003, Chapter 11 and Kalmbach & Kurz 1992), it is in the interests of (political) decision-makers, on the one hand, to drive technical progress forward and, on the other, to shape the diffusion process through the creation of suitable institutions. For this reason, the role of institutions in the respective model economies is examined in detail. Both formal institutions, such as different legal systems, and informal institutions, such as historically developed norms, are taken into account.

Finally, in the fourth part, mathematical tools are presented which are necessary for addressing tasks 2 and 3. In particular, the theory of Lie symmetry analysis (Bluman and Kumei 1989) is adapted for economic modelling purposes.

Bibliography

Bluman, G.W.; Kumei, S. (1989): Symmetries and Differential Equations. New York: Springer.

Kalmbach, P.; Kurz, H.D. (1992): Chips and Jobs. On the employment effects of the use of computerised equipment. Marburg: Metropolis-Verlag.

Kurz, H.D. (2008): Innovations and profits: Schumpeter and the classical heritage. Journal of Economic Behaviour & Organisation, 67 (1), 263–278.

North, D.C. (1990): Institutions, institutional change, and economic performance. Cambridge and New York: Cambridge University Press.

Rogers, E.M. (2003): Diffusion of innovations. 5th edition, New York: Free Press.

Schumpeter, J.A. (1912): Theory of Economic Development. Berlin: Duncker & Humblot.

Schumpeter, J.A. (1961): Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process. Göttingen: Vandenhoeck & Ruprecht.

Schumpeter, J.A. (2005): Capitalism, Socialism and Democracy. 5th edition, London: Routledge.

Steedman, I.; Metcalfe, S. (2011): Mr Schumpeter and the Classics. Papers on Economics and Evolution. Jena: Max Planck Institute for Economics, Evolutionary Economics Group.

Veblen, T. (1898): ‘Why is economics not an evolutionary science?’ *The Quarterly Journal of Economics*, 12 (4), 373–397.

Veblen, T. (1924): The Theory of the Leisure Class, New York: B.W. Huebsch.

An empirical analysis of production structures in Europe

Supported by funding from the Austrian National Bank’s Anniversary Fund (project number: 13372)

Grant amount: EUR 71,000.00

Duration: 2009–2012 

The starting point and main motivation for undertaking this project was an interest in the effects of European integration on the economic situation of European nations. The research project therefore addressed research questions at the interface between structural change and international economics. The study examined changes in local industrial patterns and in the specialisation patterns of countries resulting from the European integration process. This topic is of particular interest in relation to economic development in Europe, given that trade and production barriers have been gradually dismantled following the implementation of a single market and the introduction of a single currency. The removal of these barriers has a significant impact on industrialisation and on the competitiveness of individual countries. Given the expansion of international trade opportunities and the need to ensure the functioning of the monetary union, it seems highly relevant to determine whether individual countries are diverging economically or whether the markets are flexible enough to counterbalance growing trends towards specialisation and concentration.

This research project makes a contribution to a field of research that has only recently emerged. A deeper economic understanding, as well as an understanding of the forces at work, has so far been limited. Although trends towards convergence in income levels have been extensively addressed in the literature (e.g. Easterlin 1960, Borts and Stein 1964, Williamson 1965 or Theil 1967), structural convergence has so far received little attention, although studies suggest that income and productivity convergence do not necessarily lead to structural convergence; and even if they do, the process of structural convergence proceeds much more slowly than that of productivity levels due to agglomeration effects and path dependencies (Fagerberg 2000 or Gugler and Pfaffermayr 2004).

Anderton et al. (1992) distinguish between three different concepts of structural convergence. Firstly, structural convergence can refer to the assimilation of economic institutions, legal practices and organisational structures within which firms operate. Secondly, structural convergence can be understood as the adjustment of costs, prices, inflation and exchange rates. And thirdly, structural convergence can be defined as genuine convergence, i.e. as a reduction in differences regarding working conditions, living standards, employment rates, unemployment and labour productivity. In this research project, we have focused exclusively on the third aspect of structural heterogeneity.

In particular, the following questions were examined:

What are the main causes of patterns of concentration and specialisation from the perspective of economic theory? Are there insights that are consistent with empirical findings? This is particularly relevant because a deeper understanding of the processes leading to concentration and specialisation is necessary to justify successful economic policy for the European Union and, in particular, for the (structurally) lagging countries.

What statistical tools are available for analysing concentration and specialisation processes? What constitute useful measures of specialisation? Once these have been defined: what are the advantages and disadvantages of the various methods for analysing concentration and specialisation?

Has integration altered the geographical distribution of industrial locations in Western Europe? If so: Which industries are most affected, and what characteristics do these sectors share? Which countries are able to attract which industries?

With regard to the European Union’s economic policy, it is of particular interest whether increasing integration unleashes agglomeration forces that lead to growing disparities between the centre and the periphery. In this context, Krugman (1991b) put forward the hypothesis that European integration leads to spatial specialisation of European industries, comparable to the economic clusters in the United States.

Have the economic structures of Western European countries become more similar over time? What differences exist between Western European countries? In this regard, it is of particular interest to compare the differences in economic development between latecomers such as Finland and Ireland with those of Greece and Portugal.

We limit our analysis to the national level, although heterogeneity at the regional and urban levels is also highly relevant. For example, it is a common concern that peripheral regions are losing competitiveness, leading to job losses as a result of economic integration (Krugman, 1991 and Krugman and Venables, 1995), which in turn leads to slower economic growth and ultimately widens the gap with prosperous regions and economic centres. Furthermore, we do not address the concentration of individual industries at the local level, such as the textile industry in the Italian region of Prato or the concentration of the automotive industry in Detroit.

In Chapter 2, we provide a literature review which does not contain any new information but aims to bring together various strands of research that have hitherto been examined separately, and to give an overview of theoretical and recent empirical research. Firstly, we discuss both cross-sectoral and inter-industry patterns of economic development. As the processes driving these developments vary greatly, it is necessary to make this distinction. Secondly, we highlight the factors driving both (de-)concentration and (de-)specialisation. Although these two phenomena can go hand in hand, they are not the same. Distinguishing between them is therefore an important task. Thirdly, we report on empirical findings for Western European countries in order to understand what the main driving forces are and, at the same time, to ascertain the extent to which theoretical models hold true in reality.

To date, there has been no clear guidance on which concentration and specialisation indices should be used for empirical studies, nor on the extent to which empirical results depend either on the index selected to measure patterns of concentration and specialisation or on the (aggregation of) the databases. As studies have reported conflicting results, we aim to assess whether these two factors influence empirical findings. We therefore not only present a comprehensive overview of the characteristics that an appropriate measure of specialisation should fulfil, but also focus on the shortcomings of the indices used in empirical research. To uncover the differences between the most commonly used specialisation indices, both absolute and relative indices are applied to European employment shares in ten to fourteen Western European countries, covering up to 51 industries, for the period 1970 to 2005.

Chapter 4 builds on the joint paper with Claudia Schmiedeberg, ‘Structural Convergence of European Countries’, published in *Structural Change and Economic Dynamics*, 2010, vol. 21, 85–100. We extend this work by comparing the results obtained in that paper with sector- and country-weighted indices, which, on the whole, do not alter the overall picture for the manufacturing and service sectors as a whole. With regard to the development of individual industries, the results are too inconsistent, whether concentration is measured in absolute terms or relative to the size of the industry. In this respect, we demonstrate the influence of an industry’s size on empirical results. We thus identify a third factor, alongside the data set and the choice of index, that influences empirical results relating to concentration and specialisation processes. Furthermore, we show that it is necessary to analyse the development of concentration patterns in each industry individually, as these patterns, on the one hand, occur at different points in time and, on the other hand, can identify different forms of convergence (or divergence): general convergence or developments within a country (a club). Finally, in a descriptive data analysis, we show that sector characteristics such as cross-sector linkages and economies of scale have a positive influence on the degree of concentration, whilst we do not find this relationship with intra-sector linkages.

 

In Chapter 5, we improve upon the existing findings by using data for all Western European countries covering a long time period and a wide range of sectors, which is important for obtaining robust results. Furthermore, we are interested in both the similarities and the differences between the countries under investigation. We therefore assign individual countries to ‘clubs’—that is, groups of countries sharing common characteristics—and analyse the development of these clubs and their constituent countries over time. In this way, we can distinguish between emerging economies and frontrunners and replicate the structural change that has occurred in each subsample. We then demonstrate that even in a globalised world, where transport costs have been reduced as a result of technological revolutions (e.g. the internet), distance still constitutes an important explanation for patterns of concentration and specialisation. By adopting a long-term perspective and examining developments in European countries and industries since the 1970s, we can shed light on the structural developments in Western Europe and provide insights into the questions of whether countries have become more heterogeneous over time and whether the process of European integration, through the removal of trade barriers, has had a significant impact on competition, meaning that the sectors in which countries have specialised and the degree of concentration within individual sectors have changed. A key question within the European Union – whether the economic core is gaining at the expense of the periphery – is also examined in depth, as the free movement of capital and labour is likely to increase the efficiency of production.

We have presented this work at various conferences and meetings, including the FIW Workshop 2010, the NoEG Conference 2011 and the Göttingen Workshop on ‘International Economic Relations’ in 2011.

The Graz Schumpeter Centre is one of the associated partners in the EE-T project (Economics e-Translations), which is funded by the European Commission as part of the Erasmus ‘Lifelong Learning’ programme.

The aim of the EE-T project is to investigate the influence of translations of economic texts on the history of economic thought in Europe. Historical and linguistic analysis of various translations is essential for understanding the dissemination of economic ideas and thus enabling broader access to the history of economic thought.