Key Economic Research Findings from AEA Conference
The American Economic Association (AEA) conference in Philadelphia, a significant event for economists globally, showcased new research findings across various fields.
AI and Productivity: The J-Curve Effect
Research titled "The Rise of Industrial AI in America: Microfoundations of the Productivity J-curve(s)" by Kristina McElheran, Mu-Jeung Yang, Zachary Kroff, and Erik Brynjolfsson indicates that companies adopting new AI technologies initially experience a decrease in productivity, followed by a sharp increase. This pattern is referred to as a "J-curve."
Companies adopting new AI technologies initially experience a decrease in productivity, followed by a sharp increase, a pattern referred to as a "J-curve."
- The study analyzed data from 2017-2021 involving tens of thousands of manufacturing firms that implemented AI-related technologies such as machine vision, automated vehicles, AI-enabled industrial robots, and predictive maintenance.
- Initial productivity declines were observed, in some cases by as much as 44%, attributed to adjustment costs like investment, employee training, and operational reconfiguration necessary for a "J-curve" transition.
- Subsequent productivity growth was significant, particularly for early adopters, which tended to be newer companies. Older, larger businesses faced greater challenges in adapting due to existing organizational infrastructure.
Long-Term Impact of Wartime Science Funding
Dan Gross and Bhaven Sampat, in their paper "The Therapeutic Consequences of War: World War II and the 20th-Century Expansion of Biomedicine," highlight the enduring effects of U.S. government science investment during World War II.
U.S. government science investment during World War II had enduring effects, shaping scientific R&D support for decades.
- The Committee on Medical Research (CMR) was established during WWII to fund scientific research, aiming to improve soldier health. It collaborated with universities and private foundations, leading to achievements like the mass production of penicillin.
- The CMR's model of government-private sector collaboration became a template for U.S. scientific R&D support for decades.
- The research demonstrates that scientific and technical fields subject to CMR investments during WWII experienced disproportionate growth for 10-30 years afterward, contributing to increased scientific discoveries and pharmaceutical innovation.
GDPR's Influence on Clinical Trials
Sukhan Kang and Jennifer Kao's working paper, "Data Privacy Regulation and Innovation," examines the impact of the European Union's General Data Protection Regulation (GDPR) on pharmaceutical innovation.
The GDPR has led to an 18% reduction in the total number of clinical trials by affected companies.
- The GDPR, enacted in 2018, aims to protect data privacy but affects medical research by limiting data sharing and increasing compliance costs, as patients can request data deletion.
- Findings show an 18% reduction in the total number of clinical trials by affected companies. Trials were less likely to occur in the EU, focused on fewer diseases, took longer to complete, and had lower completion rates.
- Research collaborations, especially involving smaller, younger firms, decreased due to the increased burden of managing GDPR compliance.
Tariffs and Consumer Bearing the Cost
Economists Omar Barbiero and Hillary Stein of the Federal Reserve Bank of Boston, in their paper "The contribution of imports to consumer prices," provide new insights into how tariffs on intermediate goods affect consumer prices.
Consumers bore the primary financial burden of the 2018 tariffs, even after accounting for trickle-down effects.
- Using new measurement tools, the researchers analyzed the 2018 tariffs.
- Their findings indicate that consumers bore the primary financial burden of these tariffs, even after accounting for the trickle-down effects of tariffs on intermediate goods throughout the economy.
Minimum Wage and Employment for People with Cognitive Disabilities
The paper "Effects of the Minimum Wage on Employment of Young Adults with Cognitive Disabilities" by Barry Chiswick, Hope Corman, Dhaval M. Dave, and Nancy Reichman investigates how minimum wage increases affect employment outcomes for individuals with cognitive disabilities.
A one-dollar increase in the minimum wage correlated with a 2.5% to 5.1% decrease in employment for adults with cognitive disabilities.
- This study is noted as among the first to specifically focus on employment for people with cognitive disabilities, a group that often has lower education, income, and employment levels and is frequently paid minimum wage.
- Analysis of state-level minimum wage increases revealed that a one-dollar increase correlated with a 2.5% to 5.1% decrease in employment for adults with cognitive disabilities, with the most significant impact on those with the least education.
- Potential factors for this decline include workers choosing to leave the labor force due to eligibility concerns for public assistance programs, increased competition for minimum wage jobs, and employers being less willing to hire individuals with cognitive disabilities at a higher wage.
- Despite these specific findings, the overall share of working adults with cognitive disabilities increased from 33% to 49% during the study period.