Self Help

Innovation for the Masses - Neil Lee

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Matheus Puppe

· 41 min read

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Here is a summary of the key points from “Innovation for the Masses”:

  • The book explores how to spread the benefits of innovation and high-tech economic growth more widely, so that more residents in innovative regions and cities can prosper, not just those working directly in high-tech fields.

  • It acknowledges there is no consensus on the best policies to spur innovation, but most agree innovation is important for improving living standards.

  • There are three main routes for countries to become rich - extracting natural resources, becoming financial hubs through low taxes/openness, and innovation. But resources and tax havens are limited strategies.

  • For most rich countries, innovation through new products/processes developed is central to their economic model and high incomes. Countries with higher R&D/innovation tend to have higher GDP per capita.

  • However, the localized effects of innovation are often polarized - innovative cities struggle with high housing costs, income inequality, and economic models that benefit fewer residents directly.

  • The book uses case studies of countries like Switzerland, Austria, Taiwan, and Sweden to examine how some nations have promoted wider prosperity and sharing of innovation benefits beyond just high-tech sectors.

So in summary, it frames innovation as important for prosperity but explores how its effects can be narrowed, looking at examples of sharing innovation’s gains more broadly across populations and regions.

  • The passage looks at the relationship between innovation (measured by R&D intensity) and economic performance. It finds a strong positive correlation, as shown in Figure 1, indicating innovation is important for development.

  • However, high-tech innovation has also concentrated income/wealth and led to rising inequality within countries. The middle class has declined in many advanced economies. There are also persistent inequalities along lines like ethnicity, gender, and location.

  • Places with high levels of innovation like Silicon Valley are characterized by significant inequality. While innovation has economic benefits, those gains are not always shared equally. National institutions and policies influence how inequality develops.

  • The Silicon Valley model has been widely emulated through policies like technology parks and venture capital funds. However, Silicon Valley also faces problems like homelessness and stagnating wages. Other innovation hubs struggle with issues like inequality and domination by capital cities.

  • The Silicon Valley model leads to radical innovation but not necessarily broadly shared prosperity. Innovation policy needs to consider not just increasing innovation but also equitable distribution of gains.

  • The book examines the relationship between innovation and inequality, focusing on places where innovation leads to widely shared prosperity rather than just driving inequality.

  • It challenges the conclusion that innovation inevitably results in high inequality. The focus should not just be on increasing innovation but how its benefits are distributed.

  • There can be “good inequality” if it provides incentives for risk-taking that increases living standards overall. But this often leads to “bad inequality” where opportunities become limited.

  • Countries are divided into four groups - those with high innovation/low inequality, high innovation/high inequality, low innovation/low inequality, low innovation/high inequality.

  • The book focuses on countries in the high innovation/low inequality group, like Finland, Sweden, Denmark, Switzerland, Austria and Germany.

  • Three main arguments are made: 1) Models beyond Silicon Valley and China create innovation with shared prosperity. 2) Coordinated innovation and redistribution policies are needed. 3) Specific country case studies show different ways to balance innovation and equality.

So in summary, the book examines how some countries are able to combine high levels of innovation with broadly shared prosperity, challenging the view that innovation inevitably increases inequality. It studies the policies and approaches used in different national contexts.

The passage discusses key lessons from several countries that have achieved both innovation-led growth and equitable distribution of benefits. It specifically focuses on Korea, Sweden, and the role of the state.

Some important points made:

  • Korea and Sweden have strong records of creating skilled middle-class jobs through a combination of entrepreneurship and high wages alongside strong welfare states. Their models provide valuable lessons that are often ignored in favor of others.

  • The state plays a vital role in both spurring innovation and ensuring its benefits are shared widely through policies related to education/training, welfare, and establishing an inclusive innovation economy. The state’s role goes beyond just funding R&D or providing welfare.

  • Policies for innovation and broadly shared prosperity are mutually reinforcing. Examples provided are high-quality public services attracting skilled STEM workers in countries like Switzerland and Sweden.

  • Three key institutions are at work in these successful countries - those that generate innovation, enable diffusion/adaptation of innovation, and focus on redistribution and basic public services.

  • The various country examples show how balancing innovation strategies with skill development and inclusive policies can achieve growth alongside equity. Overall the passage advocates learning from the real world examples of different national models.

  • The author aims to analyze the link between innovation and living standards in different countries, focusing on how the benefits of innovation are distributed.

  • The author uses a mix of data analysis, interviews, literature review, and standardized data on topics like income inequality.

  • Innovation is discussed as a complex, cumulative process that relies on relationships rather than lone geniuses. It involves both invention (new ideas) and successful commercialization of those ideas.

  • Countries with strong innovation tend to have benefits like high-paying jobs and economic growth, though this also increases inequality issues.

  • Each chapter focuses on a specific region within the country studied to analyze local impacts.

  • The author acknowledges limitations like oversimplification and an inability to fully cover topics like racial/gender inequality. Other factors beyond innovation like trade also impact economic outcomes.

  • Overall, the goal is to provide an overview of how different models in different countries have distributed the benefits of innovation and insights for policymakers.

The passage discusses several “stylized facts” about innovation:

  1. Innovation is complex, requiring a mix of skills, financing, and commercialization. Mastery of technology alone is not enough without commercial distribution systems.

  2. Innovation is nonlinear - there is no direct link between inputs like R&D spending and outputs like new innovations or growth. Innovation often happens outside firms and through combining existing knowledge.

  3. Innovation is a messy process that is not just about individual inventors or products. It involves teams building incrementally on each others’ work at different scales over time.

  4. Innovation is broader than just new technologies - it includes social, managerial, and other types of innovations. It happens at all stages of production and distribution, not just invention.

  5. Innovation requires both developing new technologies and widely diffusing/adapting them. Innovation is as much about adapting ideas as creating them. Small incremental changes are also important forms of innovation.

  6. The key is not just novel products but innovations across the entire process from concept to production to usage. Reinvention and improvements to existing products are major forms of innovation. Innovation benefits are more broadly shared when focused on incremental changes rather than novel technologies alone.

In summary, the passage argues innovation is a complex, nonlinear, messy process that requires combining technology with commercialization systems and adapting/diffusing ideas, not just focusing on major novel inventions.

  • The passage discusses the focus of UK science funding on “the best science” according to expert review, but argues this neglects later stages of innovation where value is often created.

  • It uses the UK as an example, noting its focus on making the country a global leader in AI, but this could skew incentives away from more worthwhile marginal improvements.

  • Diffusion of innovations is important for learning and adaptation but is less studied than initial sparks of innovation. Industries differ in how innovations diffuse.

  • Institutions play a key role in validating and driving adoption of innovations, beyond just commercialization factors.

  • Innovation systems are both highly localized due to clustering effects but also internationalized via skilled labor mobility and technology absorption from abroad.

  • The direction of innovation is shaped by human decisions around funding and priorities, and could be used more directly to address social problems if the political will existed.

  • Innovations are not neutral and can have harmful environmental or social effects that were unforeseen.

  • Joseph Schumpeter highlighted how innovation leads to “creative destruction” - new products, processes and suppliers disrupt existing firms, driving economic renewal and growth over time through an evolutionary process.

  • Innovation is driven by entrepreneurs recognizing opportunities rather than competition between identical firms. Large firms also bring new products to market through innovation.

  • Models of economic growth see technological change as a key driver of growth, by increasing productivity over time.

  • Countries spend significant funds on innovation policy to promote growth through R&D subsidies, science policy, technology policy, and broader framework conditions. Figures range from 0.14-0.4% of GDP.

  • Innovation results from complex systems and interactions between actors/policies, not just innovation policy alone. Institutional approaches look at broader social and economic structures.

  • Measuring innovation is difficult but commonly used metrics include patents, research workforce size, and R&D spending which produce similar country rankings, though each has limitations and can be gamed. Inputs and outputs both have issues, and innovation involves more than just these metrics.

  • Some key points about innovation and living standards based on the author’s great-grandfather’s experience:

    • Incremental/minor improvements to existing technologies can still raise living standards, not just breakthrough innovations.

    • Innovation requires skills development, as seen through the great-grandfather’s technical education.

    • Local circumstances are important in ensuring the benefits of innovation are widely shared.

  • Innovation can create higher wages through two mechanisms: 1) Allowing firms to charge higher prices through product innovations 2) Increasing productivity through process innovations.

  • However, the relationship between innovation and wages is complex due to market forces, institutional factors, and imperfections in labor markets.

  • Empirically, workers in innovative firms tend to earn higher wages, as firms use wages to retain skilled workers and prevent knowledge spillovers.

  • Interestingly, even less-skilled workers in innovative firms see wage gains, as they provide supporting roles to highly-skilled R&D workers.

  • So in summary, while the connection is not perfect, innovation generally translates to improved living standards and wages, though local/institutional factors influence how widely the benefits are shared. Incremental improvements also contribute significantly.

  • R&D-intensive firms have difficulty screening job candidates in advance, so they bid up wages of existing employees to prevent them from leaving. Even non-technical roles like receptionists earn more at innovative companies.

  • However, the benefits of working at innovative firms are not shared equally. Senior staff and inventors gain the most. Entrepreneurs typically gain the largest share from successful innovations like new patents.

  • Innovations’ benefits spill over beyond the firm through ideas becoming non-rival and usable by others. Estimates find the social return on R&D is 4x the private return, justifying public R&D investment.

  • Innovations are initially protected by patents, but benefits eventually spread more widely as protections expire and others imitate or develop their own new products. This drives wider economic and labor market changes.

  • There is debate around whether automation actually causes widespread unemployment. While some studies find many jobs at high risk, others accounting for within-occupation changes find lower risk. Historical data also does not show increased unemployment from past technological changes.

  • Technology is more likely to polarize labor markets, increasing demand for high- and low-skilled jobs but reducing middle-skilled roles that involve routine tasks automated by technology. However, evidence for polarization outside specific periods and economies has been weaker.

  • Studies of polarization in countries like Austria and Switzerland found little evidence of job polarization between 2007-2017 and over longer periods. Their job markets showed more upgrading to higher-skilled jobs than polarization.

  • Across the OECD, there is some evidence of polarization with gains in high- and low-skilled jobs and losses in middle-skilled jobs. However, growth was larger in high-skilled jobs, indicating a trend toward greater professionalization rather than polarization.

  • Austria and Switzerland saw the largest increases in high-skilled jobs, likely due to differences in their institutional structures and policies compared to countries that experienced more polarization.

  • New technologies have changed job tasks over time, reshaping rather than eliminating office work. The impact of future AI technology will depend on policy frameworks regulating its effects on labor markets.

  • While innovation may destroy some jobs, it also creates and modifies jobs. Being involved in innovation is generally better than just experiencing its impacts. Skills need to be continually upgraded to keep pace with technological change.

  • Tradable sectors involve production in one place and consumption elsewhere. Innovations in tradable sectors like technology can concentrate economic returns and benefits in the place of production.

  • Hairdressing is a classic non-tradable sector since haircuts must occur where the consumer is located. Innovations in haircutting may displace local competitors but are unlikely to drive broad local economic growth.

  • Tradable sectors are more valuable for local economies since innovations can generate multiplier effects as the sector expands locally. However, jobs in non-tradable sectors also benefit from growth in tradable sectors.

  • Productivity growth comes not just from innovation at the frontier but also from diffusion and adoption of technologies elsewhere over time. Diffusion allows other places to catch up. While initial benefits are concentrated, widespread diffusion eventually leads to broader sharing of benefits.

  • Diffusion is geographically bounded as knowledge spills over between actors in certain regions that become lead markets. Over time, codification and spread enables less skilled workers and firms to adopt technologies. This process can reduce spatial economic inequality.

  • Both invention and widespread diffusion/implementation through various skills are important for converting innovations into commercialization and economic impact. Too much focus is placed on invention alone.

  • Innovation is often a gradual process of incremental improvement rather than radical change. Continuities are more important than discontinuities.

  • Mid-skilled workers who can adapt technologies to new circumstances play an important role in diffusing innovations. But many systems lack skills training needed for diffusion.

  • Lack of technician skills in the UK life sciences sector, for example, limits firms’ ability to effectively deploy new technologies.

  • Local economies can get trapped in cycles where lack of skills limits firms’ strategies and discourages further skills development.

  • Finegold and Soskice argued the UK fell into a “low-skill equilibrium” with poor skills limiting productivity and innovation. Simply investing in skills is not enough without complementary institutions.

  • Successful regional economies have dynamic “clusters” with interconnected firms, skilled workers, universities, infrastructure, and culture supporting continual skills upgrading and innovation. Silicon Valley is a classic example.

  • Firms invest in R&D and workers invest in skills when these strategic complements reinforce each other over the long run. Ensuring appropriate skills development is key to innovation and diffusion.

Here are the key points about scientists and radical innovation from the summary:

  • Scientists are often focused on radical innovation, pushing new technologies and ideas to their limits. However, if the goal is to improve living standards broadly, it may be better to focus on more incremental or diffused innovation.

  • The rest of the book examines lessons from places like Switzerland that have successfully combined innovation and equity. Specifically, it looks at how Switzerland enables the diffusion and adoption of innovation in a way that benefits many workers, not just those at the cutting edge.

  • Elements of the Swiss model discussed include technical skills training, niche production strategies, and a geographically balanced economy. This helps workers gain from new technologies even if they are not developing them. Strong labor protections also incentivize firms to create good jobs.

  • In summary, while scientists aim for radical changes, focusing on diffusing innovation widely and equitably, as Switzerland has done, may do more to improve living standards for the most people. The book aims to identify lessons from countries with this balanced approach to innovation and inclusion.

  • Switzerland has historically focused on niche production and quality rather than mass production due to a lack of natural resources and small domestic market size.

  • Technologies could spread easily early on due to a lack of strong patent laws, allowing specialization across different parts of Switzerland.

  • Key industries like watches, machinery, and pharmaceuticals adapted to economic challenges through innovation. For example, the watch industry rebounded by shifting to luxury watches and Swatch’s mass market brand.

  • Innovation in Switzerland is characterized by precision engineering, cooperation between firms, and a focus on applications and commercializing new technologies rather than pure invention. Regional specialization and mobility between areas reduced social divisions.

  • Pharmaceutical giants like Roche and Novartis located in Basel excel through niche innovation rather than scale due to Switzerland’s high costs. Their presence has made Basel one of the most innovative cities globally on a per capita basis.

  • Innovation in the pharmaceutical industry tends to be slow, as drug development, testing and approval takes a long time. This makes market entry difficult and capital intensive. Returns depend on a few major new products.

  • Swiss pharmaceutical companies like Roche and Novartis use innovation to stay ahead of trends. They are located in cities like Basel for access to skilled workers, not low taxes.

  • Switzerland has expanded successfully into newer tech industries, with a high number of “unicorn” startups relative to population. Zurich is developing a tech scene.

  • Major tech companies like Google have R&D hubs in Switzerland due to the skilled workforce from ETH Zurich and other universities, and proximity to research.

  • Switzerland combines radical innovators with niche SME producers. Innovation policy is cautious and decentralized, focusing on education including vocational training.

  • The economy delivers for most Swiss people through high wages, low inequality, and few low-paid jobs. However, immigrants and women face disadvantages in employment and pay.

  • High living costs force specialization in niche production. Collective bargaining and universal skills help maintain high wages and limit low-pay jobs.

So in summary, Switzerland promotes innovation through education and skilled workers, while also maintaining shared prosperity through high wages, bargaining, and limiting low-quality jobs. However, it still faces challenges with inequality.

  • Switzerland has a highly successful model of innovation that combines disruptive innovation in tech sectors with more incremental innovation in other industries.

  • A key factor is its vocational education system, which provides skilled workers to support innovation diffusion. Around 38% of Swiss youth go through vocational training programs linked closely to business needs.

  • The vocational system emphasizes lifelong learning and allows transitions to higher education. This produces adaptable, skilled workers.

  • Research institutions like universities of applied science facilitate collaboration between firms and researchers, supporting local diffusion of new technologies.

  • Relatively low regional inequality and a decentralized political system help encourage innovation diffusion nationwide. Infrastructure like universities of applied science are deliberately located across Switzerland.

  • Collective bargaining and wage regulation help support high wages even for vocational workers, providing an incentive for skills development and innovation adoption.

  • Overall, Switzerland’s model balances disruptive and incremental innovation. Its vocational training and spatial policies encourage broad diffusion of new technologies, benefiting workers and businesses across the country. This inclusive, long-term approach underpins Switzerland’s innovation success.

The passage discusses innovation policy and vocational education in Switzerland and Austria. It notes that Switzerland’s vocational system is designed to provide a realistic view of the labor market and where jobs are, rather than false hopes. Firms focus on their comparative advantages rather than boasting about growth. While sometimes seen as dour, this approach has created a system where many can benefit from Switzerland’s innovation success.

Austria’s approach to innovation is then explored. The town of Leoben is used as an example of how Austria has successfully innovated in traditional industries like steel to remain prosperous, even as jobs have declined, unlike other post-industrial towns. Austria saw significant R&D growth focused on industries like steel, resulting in high-skilled job growth while mid-skilled jobs declined. Inequality increased less than most countries and income growth was higher at the bottom.

Austria’s history of innovation in low-tech sectors is explained by its past as the core of a large empire, its location between East and West, and its postwar social partnership model involving organized labor, trade unions, and political consensus to guide economic policy and investment in R&D. Thisbalanced approach helped sustain wages and ensure benefits were shared as industries restructured.

  • The Austrian model is based on social partnership between employers, trade unions, and the government. Collective bargaining is an important feature.

  • Labor contracts are negotiated at the industry level between the Federal Economic Chamber (representing employers) and the ÖGB union federation.

  • Around 95% of workers are covered by collective agreements, establishing wage floors, though in practice wages are often higher.

  • Apprenticeship programs provide vocational training, with around 40% of youth participating. This helps lower unemployment.

  • High taxes and regulations have not prevented strong employment and economic growth. Austria ranks highly in GDP per hour worked.

  • While income inequality is relatively low, gender inequality is high. Women are more likely to work part-time and earn less than men.

  • The social partnership system has weakened somewhat due to political reforms and changes in the economy. Support for it depends on shared interests between stakeholders.

  • Austria has seen relatively flat income inequality since 1980 and growth that benefits lower-income groups, though inequality has increased modestly over time.

  • Redistribution occurs mainly through services rather than direct transfers, and predistribution of income also plays an important role in shared prosperity.

  • An Austrian technologist commented that Linz, Austria is like Silicon Valley, but Austria lags Silicon Valley on traditional metrics like venture capital and university rankings.

  • However, Austria performs well on output measures like median wages and employment rates. Some successful tech companies also come from Austria.

  • In the late 90s, Austria’s R&D spending as a share of GDP was below the OECD average. But over the next two decades, it saw the second fastest increase in R&D intensity in the OECD.

  • This success in increasing R&D intensity contrasts with many countries’ failures to hit R&D targets. Only two out of 112 targets across 42 countries were actually met.

  • Austria increased private sector R&D funding through consensus between politicians, businesses, and experts. Higher R&D spending became an important policy goal.

  • Austria benefited from proximity to new Eastern European markets after the fall of communism. Increased R&D was seen as critical for economic upgrading.

  • Key policies included R&D subsidies, tax credits, and new research institutions. Strong technical skills in industries like engineering also supported the growth in R&D.

So in summary, Austria transformed from a laggard to a leader in R&D intensity through a collaborative approach and supportive economic conditions, even if it did not strictly meet targets. This contrasts with many countries’ failures to significantly increase R&D.

Here are the key points about the advantages of Austrian generosity toward R&D:

  • Austria provided generous R&D tax credits and subsidies to encourage private sector R&D spending and job growth in R&D fields.

  • This led to a large increase in private sector R&D jobs in Austria from 1998-2019, with over 38,000 new R&D jobs created primarily in the private sector.

  • Austria also invested in education programs like Fachhochschulen (universities of applied science) to provide skills training relevant to R&D industries and bridge academia with private sector needs.

  • Major companies like Voestalpine steel upgraded existing industries through R&D into specialized higher-margin steels rather than starting new industries from scratch. This evolutionary approach preserved jobs.

  • One region, Styria, managed to avert decline of old extractive industries through industry upgrades and adaptations facilitated by R&D, skills development, and cooperation between firms and academia.

So in summary, Austria’s generous approach to subsidizing private sector R&D, while also investing in relevant skills, allowed preservation and upgrading of existing industries and high job growth in R&D fields. This evolutionary model yielded economic benefits with less disruption than starting entirely new industries.

Here is a summary of the key points about the economic situation of Wales compared to Styria:

  • In the mid-1970s, Wales and Styria had similar industrial structures focused on heavy and extractive industries. Wales had a significantly higher GDP per capita at that time.

  • For the next two decades, their GDP per capita levels were about the same (“level-pegging”).

  • In the 2000s, Styria developed an economic lead over Wales. Styria’s heavy industries became more innovative, while Wales experienced economic decline.

  • A key factor in Styria’s resurgence was networks between government, institutions, and firms that promoted partnership approaches to economic upgrading based on existing local strengths. It was not a top-down process but more “organic, strategic development.”

  • Strong innovation institutions in Styria, including five universities, helped advance this agenda by enabling collaboration between firms, researchers, and technology transfer. This supported innovation diffusion.

  • Styria saw a disproportionate increase in R&D spending compared to its population size, focusing on innovation in low- and medium-tech industries rather than digital/high-tech.

  • Styria avoided economic decline through innovation and upgrading existing industries rather than lowering costs. Networks and institutions were important in supporting this upgrading process.

Here is a summary of the key points about Taiwanese economic development:

  • Taiwan experienced rapid economic growth from the 1970s-2000s, overtaking Japan’s per capita GDP by the late 2000s. This challenged theories that inequality was inevitable in development and that government intervention harmed growth.

  • In the early years after WWII, Taiwan had infrastructure from Japanese colonial rule but was poor. Export-focused growth and US aid helped development. Land reforms reduced landlord power and created a stakeholder society.

  • A “developmental state” model focused on guiding and shaping the economy through industrial policy, skills development, technology promotion, and export targets rather than just free markets. This was led by Robert Wade’s theories.

  • Rapid growth was initially led by small and medium enterprises rather than large conglomerates, helping more equitable income distribution compared to Korea.

  • However, after 2000 inequality increased as younger workers’ living standards eroded due to high capital incomes among the wealthy. The development model transitioned toward greater innovation and specialization over time.

So in summary, Taiwan achieved remarkable growth through an activist developmental state model but more recently faced increased inequality challenges as its economy advanced. Both the successes and recent failures provide lessons for economic development strategies.

  • Taiwan’s early economic development after 1949 focused on increasing agricultural productivity and exporting natural resources, food, and textiles.

  • Beginning in the 1970s, Taiwan started exporting more advanced products like electronics. By the 2000s it was a leader in technology fields.

  • The Taiwanese state actively promoted this evolution by selectively working with existing industrial strengths and promoting upgrading to higher-value products.

  • Taiwan developed a strong ICT industry starting in the 1960s by attracting foreign firms and establishing export processing zones. It also supported the growth of domestic semiconductor firms.

  • Key domestic firms like TSMC were spun out of government research institutions like ITRI. ITRI played several roles in facilitating Taiwan’s technology development.

  • Taiwan achieved growth while also reducing inequality, challenging theories that growth necessarily increases inequality. This was due to factors like dispersed industrialization and labor-intensive manufacturing.

  • A developmental state model continued to guide Taiwan’s innovation-led growth into the 2000s, though private firms took a larger role as capabilities increased. TSMC became a major global player in semiconductor foundry manufacturing.

  • Taiwan benefited from colonial investments in rural infrastructure and jobs across the country, rather than just large cities, which facilitated more equitable development.

  • Its small size and continued investments in roads and rural electrification after the 1960s allowed economic growth to occur throughout the country.

  • Research infrastructure developed locally, focusing on the needs of SMEs rather than large firms, contributing to export-led growth and more employment.

  • Early land reforms created a relatively equal distribution of assets, incomes, and political power, incentivizing hard work and innovation.

  • The government prioritized stability over large corporate concentration, resulting in fewer major capital owners and lower inequality.

  • Education played a key role, with massive investments that increased skills alongside technological changes, balancing out impacts on inequality. Taiwan achieved one of the highest rates of tertiary education enrollment globally.

  • STEM skills development was particularly emphasized and aligned with industry demands, benefiting technological competitiveness in sectors like semiconductors manufacturing.

So in summary, Taiwan’s growth was facilitated by a combination of colonial policies, domestic reforms and infrastructure investments that supported more equitable development, incentivized by political stability and a highly skilled workforce.

  • Taiwan’s economic growth was relatively equitable from 1981-2001, with 34-39% of growth going to the top 10%. From 2001-2017, over 50% of growth went to the top 10%, mainly due to rising capital income.

  • When accounting for individual rather than household income, inequality in Taiwan has increased significantly. Corporate profits account for a large share of rising inequality.

  • Data from the World Inequality Database shows Taiwan had high and rising inequality in recent decades, with the top 1% taking 19% of national income in 2019, far more than other Asian economies. The bottom 50% took only 12% of income.

  • Taiwan’s economic structure shifted from labor-intensive manufacturing to more skilled, high-tech services. This increased wage divergence as information-intensive jobs saw large pay increases.

  • Geographical inequality also increased as the ICT industry clustered in northern cities like Taipei and Hsinchu, driving up incomes there relative to other areas. Regional and occupational patterns of inequality are now linked.

  • Inequalities exist even within successful cities, with wages and inequality rising most in areas near technology hubs like the Hsinchu Science Park. High housing costs have further squeezed real wages.

  • Taiwan has experienced rapid economic growth but rising inequality, as skilled workers in innovative industries like ICT have benefited disproportionately.

  • Housing costs have risen sharply in tech hubs like Taipei, while education quality has not kept up with economic changes, leaving younger Taiwanese with skills shortages and low wages.

  • Gender inequality is relatively low compared to other Asian countries, but educated women are rewarded more in the labor market than less educated women.

  • Recent presidents have acknowledged the problems of inequality and pledged to promote more equitable and sustainable growth through skills development, innovation, and protections for labor rights.

  • However, maintaining Taiwan’s position in high-tech industries like semiconductors while further reducing inequality presents an ongoing challenge. Educational returns have started declining even as economic growth continues, signaling difficulties ahead.

  • The new Swedish model in the post-World War II period focused on developing new skills through job training, subsidizing worker relocation to areas with stronger demand, and maintaining a progressive tax system to keep incomes equal.

  • Economic and industrial policy aimed to sustain high levels of investment and provide workers the skills businesses needed. This kept the private sector competitive while ensuring wages only increased with productivity gains, limiting inflation. Active labor policies and a focus on high employment created a large tax base to fund the welfare state.

  • This model was very successful, helping Sweden become one of the richest countries in Europe. Exports quadrupled from 1950-1970s driven by higher value production. However, it began breaking down in the 1970s due to economic shocks.

  • Major reforms in the 1980s-1990s privatized industries, deregulated capital markets, cut corporate and income taxes, and led to job losses and budget crisis. However, post-reform growth often outperformed the US.

  • Inequality increased more in Sweden than any other OECD country due to these reforms, but incomes still rose for all. The employment rate remains high due to strong female labor participation.

  • The result is Sweden is no longer the most equal but remains relatively equal, with inequality comparable to Austria but below Norway, Finland, Denmark. Wealth inequality is actually higher than in the US/UK due to structural factors.

  • The key to Sweden’s welfare state is its universalism - everyone pays in and benefits, creating broad support to maintain high standards. Taxation appears high but is reduced through pension taxation and services for all.

  • Employment in low-wage jobs has increased in Stockholm even as the labor market has professionalized. However, Sweden’s system of wage setting through corporatist institutions prevents large firms from exploiting their market power.

  • Migration, especially the high number of asylum applications in 2015, has posed the starkest challenge to the Swedish model. Sweden’s traditionally high welfare spending was supported by its ethnic homogeneity. Research shows Swedes are less likely to support the welfare state when living near people of different ethnicities.

  • Concerns also exist around long-term declines in Swedish education quality and growing achievement gaps between immigrant and Swedish students. This could worsen disadvantages and integration issues over time.

  • While inequality is rising and the state is less redistributive, Sweden still has low inequality, high wages, and strong living standards underpinned by an innovative, competitive private sector focused on tech. Major Swedish companies include Ericsson, Volvo, IKEA, H&M.

  • Sweden is a world leader in innovation and R&D spending. The state historically supported private sector R&D and commercialization of new technologies through partnership and procurement programs.

  • Some argue high taxes and strong welfare state hinder entrepreneurship, but Sweden has been successful combining these features through a focus on high-impact, international entrepreneurship rather than low-reward local businesses more vulnerable to state competition.

  • Historically, Sweden’s strong welfare state and high taxes were thought to discourage entrepreneurship. However, Sweden is now considered a more entrepreneurial country than the US.

  • Reforms in the 1990s lowered corporate taxes and made it easier to start firms. Sweden has seen growing numbers of new firms and entrepreneurs.

  • Stockholm has emerged as a major tech hub, home to successful companies like Spotify and Klarna. These digital firms have the potential for rapid growth and market dominance.

  • While tech growth has benefited Sweden, it has also increased inequality. A small number of workers in large tech firms earn much more than others. Housing prices in Stockholm have risen sharply.

  • The concentration of tech in Stockholm is driven by the city’s strong institutions, skilled workforce, and appeal as a place to live - though it offers no major tax breaks. Stockholm has become the epicenter of Sweden’s growing digital economy.

  • Income tax revenue from high-wage tech jobs in Stockholm provide incentives for the local Swedish government to attract and support the technology industry.

  • Early successful Swedish tech companies like Spotify and Klarna helped anchor a self-sustaining tech cluster in Stockholm by providing role models, advice, seed funding, and expertise.

  • Stockholm developed supportive networks and infrastructure around these companies, including venture capital firms, serial investors, universities, and a skilled workforce. This created a reinforcing ecosystem that made it easier for more tech companies to succeed there.

  • Features like Stockholm’s quality of life, universities, workforce also attracted international talent and helped the tech sector scale up. High levels of venture capital investment, concentrated in Stockholm, show the scale and success of the local tech industry.

  • While Sweden’s high taxes may seem like a disincentive for entrepreneurship, the government played an active role in developing the tech sector through programs like public-private research partnerships and early venture capital funds. This shows that a strong state is not a barrier to innovation.

  • Sweden successfully combines an environment conducive to developing new tech firms, like access to coders, affordable housing and tax policies, while also maintaining a strong social welfare system that shares the benefits of innovation more widely.

  • Key factors include regional autonomy, centralized wage coordination, fiscal transfers, and diverse economic models. This ensures more equitable regional development.

  • However, rising inequality, especially among the top 1%, is beginning to strain Sweden’s social model as disruptive tech growth increases wealth concentration.

  • Countries like Switzerland, Austria, Taiwan and Sweden have achieved high innovation levels while also sharing benefits more widely through strategies like vocational education, applied research, knowledge diffusion institutions and redistributive policies.

  • Going forward, countries need innovation policies that not only promote technology but ensure the gains are shared, with policies addressing skills, housing, welfare and other social needs. Diffusion institutions are also important to spread benefits more broadly.

  • Innovation and equity can reinforce each other when everyone has opportunities to engage with and benefit from new technologies. But rising inequality may undermine social models if not addressed.

The passage discusses different types of institutions that are important for innovation and economic growth. It focuses on three key types:

  1. Generative institutions - These generate innovation and radical new ideas. Examples include world-class universities, venture capital firms, government research funding programs, skilled PhD systems, flexible labor markets, etc.

  2. Diffusive institutions - These spread innovations and technologies more widely through the economy. Examples include vocational training programs, small business networks, financial markets for less high-growth companies, local government economic development efforts, etc.

  3. Redistributive institutions - These help distribute the benefits of innovation more evenly across society. Examples include wage bargaining systems, minimum wages, a progressive tax system, strong public services like education and healthcare, sensible immigration policies, etc.

The passage then analyzes how countries like the US, Taiwan, Sweden, Switzerland and Austria have different combinations of these institutions. A key point is that successful innovation systems have strong institutions in all three categories - generation, diffusion, and redistribution of benefits. This allows places to benefit more equitably from innovation and technology. Examples of specific country-level institutions are also provided.

  • Inequality is circumstantial and caused by specific characteristics of the US tax system and financial markets, as well as a lack of institutions to diffuse inequality.

  • However, the scalability of US tech is both a reason for its success and the resulting inequality. Large market size allows digital tech firms to scale up, concentrating income.

  • Sweden has achieved rapid growth in tech but inequality is still rising, showing that counterexamples are imperfect.

  • We must distinguish between rapidly scaling tech firms vs more incremental innovation in other sectors like automobiles. Ownership structures may play a role, with diffuse ownership correlating with slower growth and less inequality.

  • Some countries like Switzerland and Sweden have achieved radical innovation and high incomes for middle earners, but top income inequality remains. No country has sustained growth in highly innovative firms without this type of inequality developing.

  • The nature of inequality depends on institutions - some countries develop mechanisms to widely distribute gains from innovation while others do not. The problem lies more with institutions than the nature of innovation itself.

In summary, the key debate centers around the relationship between innovation, firm growth, ownership structures, and the resulting income inequality. Effective institutions are important to widely share the benefits of innovation.

Here is a summary of some key points from the selected sources:

  • Innovation and economic development are strongly linked, as innovation leads to new products/processes and economic growth (holec & Verspagen, 2010).

  • Countries/regions with strong institutions and incentives supporting R&D tend to have higher rates of innovation (Meisenzahl & Mokyr, 2011).

  • Innovation policies need to target “grand challenges” like climate change to have impact (Coenen et al., 2015).

  • Factors like clustering of related industries, knowledge spillovers between firms, and availability of skilled labor contribute to innovation activity being geographically concentrated (Marshall, 1890; Saxenian, 2007; Storper, 1997).

  • Diffusion of innovations is impacted by geographic proximity as knowledge diffuses locally at first (Hall, 2019; Hägerstrand, 1968; Lengyel et al., 2020).

  • Inequality can arise as disruptive innovations spread unevenly across places (Kemeny et al., 2022).

  • Skills and education systems need to continually adapt to new technological needs to support innovation (Borrás & Edquist, 2015; Lewis, 2020; Vona & Consoli, 2015).

  • While automation risks some jobs, it also creates new opportunities that often require higher skills (Arntz et al., 2016; Deming & Noray, 2020).

That covers some of the key points regarding the relationship between innovation, economic development, skills, institutions and the geographic aspects. Let me know if you need any part summarized or explained further.

Here is a summary of the key points from the articles:

  • The UK has a large and innovative life sciences industry that contributes significantly to the economy and exports. It faces strong international competition, particularly from the US, Switzerland and Singapore.

  • However, the UK faces challenges in terms of translation of research into commercial outputs, lack of growth finance for SMEs, loss of talent to other countries, and an unfavorable regulatory environment compared to competitors.

  • Policy reforms are needed to address these challenges and strengthen the foundations for long-term success of the UK life sciences industry. This includes more funding for proof-of-concept and early clinical stage research, better matching of science with investor needs, visa policies to attract and retain talent, and reducing uncertainty through regulatory reforms.

  • Countries like Switzerland, Singapore and others have stronger “ecosystems” that more effectively support life sciences through regional innovation clusters, availability of risk capital, connection between universities and private sector, talent policies, and regulatory practices tuned to fostering innovation.

  • The UK could learn from these examples and strengthen the linkages between different parts of the innovation system to create a more self-sustaining high-skill ecosystem for life sciences and other industries. With the right policies, the UK industry has potential for further growth but also faces threats from more attractive foreign competitors.

Here is a summary of the key points from the sources provided:

  • In the post-WWII period, Taiwan experienced rapid economic growth and development that transformed it from a poor agricultural economy to an industrial powerhouse. This was enabled by strategic state intervention and economic planning.

  • Under KMT authoritarian rule from 1945-1986, the government implemented import substitution policies to develop domestic industries and export promotion measures to catalyze trade. This developmental state model drove Taiwan’s economic miracle.

  • Private businesses played a major role in Taiwan’s development, especially family-owned conglomerates that partnered closely with the state. Foreign multinationals also invested significantly.

  • Taiwan specialized in labor-intensive manufacturing sectors and moved up the value chain over time through continuous industrial upgrading. This dynamic transformation was shaped by both domestic entrepreneurship and global economic integration.

  • The developmental state model pioneered in Taiwan demonstrated how strategic state intervention could effectively promote rapid industrialization and economic growth, especially for a small island economy lacking natural resources. This laid the foundation for Taiwan becoming a high-income society today.

Here is a summary of the points:

  • Point 7 discusses the Kuomintang’s (KMT) authoritarian rule over Taiwan following retrocession from Japan in 1945. The KMT imposed martial law and cracked down harshly on political dissent.

  • Point 8 outlines Taiwan’s “New Ten” major development projects introduced in 2003 which aimed to improve infrastructure, education, the arts, and Taiwan’s international profile.

  • Point 9 refers to Wong’s book on Taiwan’s developmental state model.

  • Points 10-30 discuss various academic literature on developmental states, Taiwan’s economic development, innovation policies, inequality trends, and the role of the state.

  • Points 31-33 analyze how Taiwan achieved both growth and equity in its development in the 1970s according to scholars like Fei, Ranis and Kuo.

  • Points 34-46 cover topics like Taiwan’s political system, active labor market policies, education policies, and their impact on development and inequality.

  • Points 47-69 discuss trends in Taiwan’s inequality, changing labor markets, regional disparities, housing affordability, and how it has increased in recent decades despite past successes in equitable growth.

  • Points 70-85 summarize the literature on drivers of rising inequality such as technology changes, trade, lack of labor protections, and rising housing costs in Taiwan.

Here is a summary of the key points about women and employment in Taiwan from the Brookings Institution article:

  • Taiwan has a high female labor force participation rate of over 50%, one of the highest in Asia. This is due to cultural factors that emphasize education and work for women.

  • However, there is still gender inequality in the labor market. The pay gap between men and women is around 17%, and women are underrepresented in senior management and leadership roles.

  • The government has implemented policies to promote gender equality and work-life balance, such as expanding childcare services. But social attitudes still favor traditional gender roles to some extent.

  • The education system promotes equal access for males and females. However, women tend to gravitate towards certain female-dominated industries like education and healthcare.

  • Overall, Taiwan has come a long way in advancing women’s economic empowerment but still has room for improvement in achieving full gender parity, especially in leadership positions. Continued reforms and changing social and cultural norms are needed.

Here is a summary of the content from the URL provided:

The URL discusses regional inequality in Sweden and policies to reduce it. It references several other academic sources on related topics:

  • Two papers on the historical trends in regional inequality in Sweden from 1571-1850 and more recently from 1976-2005. They found rising inequality between northern and southern Sweden.

  • An OECD working paper from 2021 on how Sweden has managed to keep regional inequality in check relative to other countries. It discusses decentralization of decision-making, active labor market policies, education investment and transport infrastructure as contributing factors.

  • A 2017 paper on weaknesses in resource mobilization for renewable energy innovations at a local level in Sweden.

  • Other references look at venture capital patterns, Sweden’s innovation system, economic surveys of Sweden from the OECD, and Stockholm’s growth as a startup/unicorn hub.

In conclusion, the URL analyzes factors that have helped Sweden maintain relatively low levels of regional inequality, such as decentralized government, workforce development programs, education spending and transportation infrastructure connecting regions. It touches on Sweden’s strengths in innovation and startups as well.

Here are summaries of the provided articles:

  • Marcolin & Causa (2018) examines markup trends in OECD countries in the digital era, finding rising markups concentrated in ICT sectors which can have competition and inequality implications.

  • Carvalho (2018) studies promises vs actual spending on R&D policies across governments, finding over-optimistic targets are common though spending levels vary considerably.

  • Castaldi & Mendonça (2022) discusses opportunities for using trademark data in regional innovation studies to provide new insights on networks, clusters and capabilities.

  • Causa & Hermansen (2020) analyzes income redistribution through taxes and transfers across OECD countries, finding most equalize market incomes but Nordics go furthest.

  • Chancel (2019) outlines 10 key facts about rising inequality in advanced economies like increasing shares of wealth and income going to top 1%.

  • Chang et al (2022) is a podcast discussing challenges and opportunities for reshoring semiconductor manufacturing to the US.

  • Chen (2018) examines Taiwan’s housing affordability crisis and government policy responses around taxation and supply.

The remaining summaries were not included due to length. Let me know if any specific ones would be useful to summarize.

Here is a summary of the key points from the referenced papers:

  • The UK has a long-standing productivity problem, with productivity growth lagging other major economies. This is due in part to the lack of “spokes” - connections and diffusion of ideas between innovative “hubs” and the wider economy.

  • Innovation diffusion is important for economic growth. Papers discuss factors that influence the diffusion and adoption of new technologies/ideas, such as the roles of universities, clusters, supply chains, skilled labor, etc. Geographic proximity facilitates diffusion.

  • Countries like Austria, Switzerland and Taiwan have implemented active labor market policies, vocational training, targeted industry support, and R&D subsidies to promote innovation and productivity growth. This has helped spur clusters and connections between firms.

  • Rising inequality is a challenge, both within and between countries. Papers examine the role of trade, technology, education, housing prices, and taxation in impacting inequality trends in places like Taiwan and Asia more broadly.

  • Financial centers like London have been major contributors to the UK economy. However, other papers note challenges securing venture capital investment in Europe relative to the US.

  • Regional disparities exist in the UK in areas like wages, innovation jobs, and future outlook. Place of birth also correlates with long-term economic outcomes. More dispersed innovations and job growth could help reduce some spatial inequalities.

That covers the major themes discussed across the referenced papers regarding productivity, innovation diffusion, economic growth strategies, and challenges around inequality and regional disparities. Let me know if any part needs more clarification or expansion.

This case series from the rsity Institute for Management Studies (IGMS) examines innovation and economic development in Austria, Sweden, Switzerland, and Taiwan. It analyzes data and reports from organizations like the OECD on topics like employment trends, income inequality, gender gaps, R&D spending, and economic policies over time. The case studies multiple countries’ experiences with issues like technological change, skills development, regional development, industry clusters, and the roles of universities and government in innovation systems. It adopts a comparative perspective to discuss challenges and opportunities for balancing economic growth with greater equality and inclusion.

Here is a summary of the article:

The article discusses labor market polarization in Austria based on an analysis of Austrian vacancy data from 2001 to 2018. Some key findings include:

  • Occupational polarization occurred in Austria, with increasing demand for high-skilled and low-skilled jobs, and decreasing demand for middle-skilled jobs. This mirrors trends seen in other developed countries.

  • Polarization was evident across all regions and sectors of Austria. Demand declined most strongly for clerks, skilled agricultural/fishery workers, craft workers, and plant/machine operators.

  • However, polarization was less pronounced in Austria compared to other countries like the US and UK. Declining middle-skilled job opportunities were partly offset by increasing demand for higher-skilled occupations.

  • Redistribution policies and strong vocational training system in Austria help mitigate rising inequalities from labor market changes to some degree. But polarization still increased income inequality over time.

  • Younger and less educated workers were more negatively affected, facing higher risks of unemployment or transitions to lower-paid jobs. Older, higher-educated workers fared relatively better.

So in summary, the article finds evidence of occupational polarization in Austria driven by technological and globalization factors, though its impact was moderated by Austrian labor market institutions compared to other nations. Rising inequalities remained a challenge.

  • Innovation is defined as the creation and implementation of new processes, products and methods. It is a driver of economic growth and improved living standards. Measuring innovation includes looking at R&D spending, patents, innovation indexes, etc.

  • There is often a trade-off between innovation and inequality, as innovation benefits tend to accrue more to higher incomes initially. Innovation policy aims to balance these factors.

  • Taiwan and Sweden are held up as examples of economies that have successfully combined innovation and greater equality. Taiwan emphasized education, R&D and sectoral shifts. Sweden strengthened skills, R&D spending and maintained an inclusive welfare state.

  • Switzerland has taken a niche, adaptive innovation approach centered on vocational education and R&D cooperation. It has relatively high incomes but also income inequality.

  • Institutions like education systems, labor markets, partnerships between industry/government and policies around R&D, skills and redistribution all influence a country’s ability to successfully innovate and share the benefits of growth more evenly.

  • Geographic factors like clusters, spatial inequalities and the roles of cities and regions are also important to understanding innovation dynamics within countries.

  • Labor market performance in the years 1950-1951 saw multipler effects in 1958 from economic stimulus.

  • Nobel Prizes were awarded in the field of economics starting in 1938.

  • Patents awarded reached 46 in an unspecified year, indicating innovation.

  • Redistribution of wealth was discussed in relation to inequality in 1999.

  • A skills deficiency was noted in the labor force in 1961.

  • Social spending levels were at 147 in an unspecified year.

  • Unemployment levels were at 59% in an unspecified year.

  • Wages were discussed in relation to levels in 1946, 1950, 1955 and an unspecified year where they were between $44-47, $49-50, and $55.

  • Universities were active in research, innovation and education in 1907, 1955, 1987, 2005, 2011 and 2017.

  • The US Council of Economic Advisors advised the government on policy in 1942.

  • Venture capital funding was substantial in 1914, 1940, 1955, 1958-1959 and 1959-1961, and again in 1962.

  • Vocational education programs received attention in 1955, 1978, 1980-1987, 1987, 1988 and again in 1966, 1968, 1972.

  • Wages were a point of discussion in relation to levels, inequality and other topics in 1906, 1944-1947, 1949-1950, 1949, 1950, 1955, 1966, 1981, 1986-1987, 1991, 1996-1997, 2000, 2023-2027, 2036-2037.

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