Dynamic Complementarities Research Articles

Do preschool investments depreciate and fadeout or result in dynamic complementarities? An assessment using the Head Start Impact Study

Do preschool investments depreciate and fadeout or result in dynamic complementarities? An assessment using the Head Start Impact Study

Compulsory kindergarten education and early teenage literacy in the Philippines

We assessed the impact of compulsory kindergarten education on early teenage basic and functional literacy skills achievement using a large-scale natural experiment in the Philippines. In 2012, the Philippine government mandated compulsory kindergarten attendance for children aged five years or older prior to enrolling in the country’s basic education cycle. This created a non-trivial discontinuity in the propensity of kindergarten school attendance among different cohorts of children, which we exploited in this study. We find that children who were exposed to the policy were no more likely to be able to read, write and calculate by age 11–13 years when contrasted with comparable peers who were not compelled to attend kindergarten. However, those who were exposed to the policy were more likely to reach full functional literacy by early teen-age, which is likely due to dynamic complementarities in skills formation. While other children were able to eventually catch up with basic literacy skills in later childhood, children who attended kindergarten were more likely able to read and write before entering primary school, which likely allowed them to develop further skills later.

The relationship of technological and organizational innovation with firm performance: Opening the black box of dynamic complementarities

This paper explores the dynamic nature of complementarities between technological and organizational innovation at firms. Using Spanish panel data of manufacturing firms (PITEC) over the period 2008–2016, it investigates how the formation and ending of the joint adoption of these two core types of innovation is associated with firm performance. We observe clear evidence that some sequential as well as simultaneous strategy switches towards combining technological and organizational novelties are associated with significant performance premia at firms. Our findings point out the crucial role of technological innovation in these complementarities. In the case of giving up the adoption of new elements of the complementarity bundle of innovation types, the critical disadvantage for the firm is related to dropping the adoption of technological innovation. Giving up adoption of new organizational innovation while keeping the adoption of new technological innovation appears to have no negative effect, on average, on firm performance. Our findings suggest significant coordination failures at firms attempting to introduce both core types of innovation in tandem. For many firms, the retention of the joint adoption of technological and organizational innovation over time is a costly and hard-to-maintain choice and not necessarily the one with the highest performance benefits.

In Search of Dynamic Complementarities between Early and Later Education: Evidence from North Carolina’s Pre-K and K–12 School Funding Reforms

We extend Johnson and Jackson's (2019) seminal paper on dynamic complementarities between early and late educational opportunities using modern-day programs in North Carolina. We exploit exogenous variation in the allocations made to counties for state pre-K funding (NC Pre-K) and K-12 funding allocations made to districts resulting from a court-ordered school funding reform known as the Disadvantaged Student Supplemental Fund (DSSF)—both during the mid-2000s. We find that DSSF-induced increases in K-12 per pupil expenditures had null or possibly negative impacts on students' fifth grade academic achievement. We also find no evidence of complementarities with NC Pre-K investments.

Quantifying the economic impacts of COVID-19 policy responses on Canada's provinces in (almost) real time.

We develop a methodology to track and quantify the economic impacts of lockdown and reopening policies by Canadian provinces in response to the COVID‐19 pandemic, using data that is available with a relatively short time lag. To do so, we adapt, calibrate and implement a dynamic, seasonally adjusted, input–output model with supply constraints. Our framework allows us to quantify potential scenarios that allow for dynamic complementarities between industries, seasonal fluctuations and changes in demand composition. Taking account of the observed variation in reopening strategies across provinces, we estimate the costs of the policy response in terms of lost hours of employment and production. Among other results, we show how a more aggressive response, even though it imposes higher economic costs in the short run, can lead to lower economic costs in the long run if it means avoiding future waves of lockdowns.

The Relationship of Technological and Organizational Innovation with Firm Performance: Opening the Black Box of Dynamic Complementarities

The Relationship of Technological and Organizational Innovation with Firm Performance: Opening the Black Box of Dynamic Complementarities

Start What You Finish! Ex Ante Risk and Schooling Investments in the Presence of Dynamic Complementarities

We study the relationship between risk and schooling investment in a low income setting, with a particular focus on possible ex ante effects. We first present a model that shows that such effects can arise if the human capital production function exhibits dynamic complementarity and parental preferences for human capital are not too concave. We then estimate the key parameters of the model using multiple rounds of panel data from rural India that contain, in each round, three seasons of time allocation for each sampled child. These estimates suggest an elasticity of schooling investments with respect to risk of -0.09 in this context. We then use cross-round differences in village-level irrigation interacted with rainfall variability to estimate the relationship between income risk and school time. Using this variation, we find an estimated elasticity of study time with respect to risk between -0.05 and -0.04. Finally, we simulate the effects of an implicit social insurance program, modeled after the National Rural Employment Guarantee Scheme (NREGS). Our results suggest that the risk-reducing effect of the NREGS may offset adverse effects on child education that were evident during the NREGS phase-in due to rising wages.

The Impact of Information and Communication Technologies on the Human Development in the Gulf Cooperation Council Countries : An Empirical Study

The main goal of this study is to investigate the impact of information and communication technology (ICT) on human development in the six Gulf Cooperation Council countries (GCC), particularly, the effect of ICT development index on the three-key component of human development; income, health, and education. The study focused on the years 2005-2014. Based on the theoretical background explained in the literature, the main study’s hypothesis tested using the Panel regression analysis to account for the existence of both cross sectional and time series relationship. The finding of the study shows different results ranging between positive, negative and insignificant relationship, which reflect the complexity that could associated with ICT implementation in the context of development. GCC countries spent a vast amount of financial resources to develop their ICT infrastructure, however, they failed to achieve the effective utilization of these technologies in socioeconomic development, due to mismatch between the ICT infrastructure and the availability of skilled human capital, adequate educational system, and public awareness about the importance of the ICT role in socioeconomic development. Therefore, ICTs as tool alone cannot improve human development; unless it occurs within broader context and multidimensional strategy aim to enhance the people's abilities to make the most use of these tools and techniques. Finally, the study recommends for the GCC policy makers to shift their paradigm of thinking about ICTs by changing their focus from the deployment of the ICT infrastructure to focus on analyzing and understanding the dynamic complementarities that could shape the potential role of these technologies.

Early patterns of skill acquisition and immigrants’ specialization in STEM careers

We provide empirical evidence of immigrants' specialization in skill acquisition well before entering the US labor market. Nationally representative datasets enable studying the academic trajectories of immigrant children, with a focus on high-school course-taking patterns and college major choice. Immigrant children accumulate skills in ways that reinforce comparative advantages in nonlanguage intensive skills such as mathematics and science, and this contributes to their growing numbers in science, technology, engineering, and math (STEM) careers. These results are compatible with well-established models of skill formation that emphasize dynamic complementarities of investments in learning.

Man Versus Machine: Automation, Market Structure and Skills

The paper asks a simple question. If individuals demand products from the firms in the economy and supply their skills concomitantly to the firms, then why should there be skill gap in the society, i.e., mismatch between skills that individuals possess and firm’s demand. After all, in a decentralised economy prices of various products and skill specific wages should adjust to ensure that there is match between demand and supply of skills. The paper suggests that there are three factors that keep skill gap alive. The first two are the web of dynamic complementarities in the way human beings acquire skills and the way they invent new technologies. The third factor is the lack of competition in the product market that accompanies period of accelerated technical change. The papers looks at the impact automation and globalisation has had in opening up the skill gap and suggest policies that would help close the skill gap. With accelerated changes in technology and concomitant social changes, it is ever so more important to have a learning environment that allows workers and citizens in the society to learn and adapt flexibly.

The complementarities between formal and informal channels of university–industry knowledge transfer: a longitudinal approach

In this paper we study the interplay between formal and informal channels of university–industry knowledge transfer (UIKT) over time. To do so, we rely on longitudinal and qualitative interview data analysis allowing us to observe the notable research and valorization trajectories of two reputable researchers in the fields of robotics and pharmacy at the University of Strasbourg. Our findings show that: (1) dynamic complementarities between formal and informal UIKT are important; (2) at the individual and team level, such interactions contribute to creating a strong cumulative effect with regard to valorization activity; (3) They also reinforce the collective dimension of valorization, which is performed by teams rather than by isolated individuals; and (4) the best academic entrepreneurs make use of the different UIKT channels in an entrepreneurial way with a clear long-run valorization strategy in mind. These results have strong managerial and political implications with regard to the valorization of academic research.

Reducing Inequality through Dynamic Complementarity: Evidence from Head Start and Public School Spending

We compare the adult outcomes of cohorts who were differentially exposed to policy-induced changes in Head Start and K–12 spending, depending on place and year of birth. IV and sibling-difference estimates indicate that, for poor children, these policies both increased educational attainment and earnings, and reduced poverty and incarceration. The benefits of Head Start were larger when followed by access to better-funded schools, and increases in K–12 spending were more efficacious when preceded by Head Start exposure. The findings suggest dynamic complementarities, implying that early educational investments that are sustained may break the cycle of poverty. (JEL H52, H75, I21, I26, I28, I32, I38)

Comparing recursive equilibrium in economies with dynamic complementarities and indeterminacy

We develop a new multistep monotone map approach to characterize minimal state-space recursive equilibrium for a broad class of infinite horizon dynamic general equilibrium models with positive externalities, dynamic complementarities, public policy, equilibrium indeterminacy, and sunspots. This new approach is global, defined in the equilibrium version of the household’s Euler equation, applies to economies for which there are no known existence results, and existing methods are inapplicable. Our methods are able to distinguish different structural properties of recursive equilibria. In stark contrast to the extensive body of existing work on these models, our methods make no appeal to the theory of smooth dynamical systems that are commonly applied in the literature. Actually, sufficient smoothness to apply such methods cannot be established relative to the set of recursive equilibria. Our partial ordering methods also provide a qualitative theory of equilibrium comparative statics in the presence of multiple equilibrium. These robust equilibrium comparison results are shown to be computable via successive approximations from subsolutions and supersolutions in sets of candidate equilibrium function spaces. We provide applications to an extensive literature on local indeterminacy of dynamic equilibrium.

Human capital growth and poverty: Evidence from Ethiopia and Peru

In this paper we use high quality data from two developing countries, Ethiopia and Peru, to estimate the production functions of human capital from age 1 to age 15. We characterize the nature of persistence and dynamic complementarities between two components of human capital: health and cognition. We also explore the implications of different functional form assumptions for the production functions. We find that more able and higher income parents invest more, particularly at younger ages when investments have the greatest impacts. These differences in investments by parental income lead to large gaps in inequality by age 8 that persist through age 15.

Agency: Phenomenological insights and dynamic complementarities.

Agency: Phenomenological insights and dynamic complementarities.

Coévolution entre institutions et culture : une application au développement de long terme

Cet article propose un cadre formel permettant d’étudier la coévolution entre institutions et culture et leurs implications en terme de résultats socio-économiques. Le changement institutionnel est décrit comme un processus permettant de résoudre des problèmes fondamentaux de crédibilité politique entre groupes sociaux. L’évolution culturelle est modélisée comme un processus de transmission intergenerationnel au sein d’une dynamique de populations. Nous caractérisons les dynamiques institutionnelles et culturelles comme pouvant être de type renforçantes (complémentarités dynamiques) ou de type atténuantes (substitutions dynamiques) et nous discutons des implications empiriques en termes de dynamique comparative. Un exemple d’application au cas d’une économie en processus de modernisation et de changement structurel est présenté.

Comparing Recursive Equilibrium in Economies with Dynamic Complementarities and Indeterminacy

We prove the existence of a minimal state space recursive equilibrium (RE) for a broad class of infinite horizon dynamic general equilibrium models with positive externalities, dynamic complementarities, public policy, equilibrium indeterminacy and sunspots. These are new multistep monotone map methods, and apply to economies for which results on the existence of dynamic equilibria are unknown and existing methods do not apply. Our methods are global, based on monotone operators defined on Euler equations, and do not appeal to the theory of smooth dynamical systems that are commonly applied in the literature. Rather, using partial ordering methods, we provide a qualitative theory of equilibrium comparative statics in the presence of multiple equilibrium. These comparison results are computable via successive approximations from upper and lower bounds of particular sets of functions. We provide applications of our results to an extensive literature on local indeterminacy of dynamic equilibrium.

Aging, growth and the allocation of public expenditures on health and education

AbstractIn this paper, I develop an overlapping generations endogenous growth model in which both public education and health are sources of growth by affecting the accumulation rate of the human capital stock and the savings rate over life expectancy. I first find that dynamic complementarities of public expenditures lead to minimum threshold levels of public education and health expenditures that ensure sustainable growth. I then show how governments can use the allocation of public expenditures as an alternative policy instrument to maximize growth without increasing the tax rate or the retirement age, as usually happens in aging economies.

Dominant dynamic complementarities and technology–motivated acquisitions of new, technology–based firms

The borderlines between a firm and its environment are becoming increasingly blurred. Small firms and large firms can be viewed as constituting innovation networks where dynamic complementarities between small and large firms are exploited. Network structures are different in different industries, markets, and in different technological systems. The characteristics of the industry, market, or technological system can be expected to affect the configuration of innovation networks. In addition, it is expected that network transactions, which provide a basic mechanism of change in networks, are different in different industries, markets, and technological systems. Studies on industry evolution in Finland and the conceptual analysis in the present paper indicate that some interrelationships exist between systemic determinants and the patterns of acquisition of new technology–based firms. The concept of dominant dynamic complementarities is developed and used to hypothesize differences in size distributions of technology–based firms in different industries. A tentative typology of dominant dynamic complementarities is developed.

Dynamic complementarities in innovation strategies

Using a panel of Irish manufacturing plants over the period 1991–2008 we test for dynamic complementarities in the joint use of internal R&D and external knowledge sources. We find little evidence, either from considering successive cross-sectional waves of comparable surveys, or in terms of the strategy switch choices of specific plants, that there has been a systematic move towards the joint use of internal and external knowledge in innovation. We then test formally for the presence of complementarities in the joint use of internal R&D and external innovation linkages. In static terms we find no evidence of complementarity, but in dynamic terms find evidence that strategy switches by individual plants towards a more ‘open’ strategy are accompanied by increased innovation outputs.