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A Study of the Comparative Political Economy of Innovation: How Political Institutions Affect Long-Run Technological Progress

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Abstract:

Is there a causal relationship between government structure and long-run technological progress? This question is motivated by a series of empirical observations which have over time generated the perception that decentralized states, those with multiple and balanced centers of political power, are more technologically innovative than centralized states. However, this relationship has yet to be formally tested. The purpose of this paper is to take steps in this direction, first by reviewing relevant contributions from the theoretical literature, then by attempting a statistical test of the relationship between national innovation rates and government centralization, and finally by conducting a prima-facie case-study in order to generate further testable hypotheses. This paper will show, first that political-economic theory suggests various causal paths by which either decentralization or centralization might promote technological progress. The former is exemplified by race-to-the-bottom competitions for investment, the latter by reductions in transactions and coordination costs. Econometric analysis using a new dataset of international patent activity to measure innovation and either dummies or Lijphart?s index to measure decentralization suggests that if a structure-technology relationship exists then it is more complex than that characterized by current theories. A brief review of previous case studies, as well as a study of innovation and diffusion of two blood products technologies, are then conducted in order to better specify the theory. The case studies suggest that technological progress is not neutral, but rather creates winners and losers, and the losers act politically to defend themselves. Losers seek to capture government in a Stiglerian manner in order to influence policy and thereby to block or slow threatening technological change. This capture appears to be less difficult or costly when government is centralized into fewer capture ?points?, whereas decentralized government drives up these costs while offering innovators and diffusers the chance to "venue-shop" around political resistance. Electoral institutions, insofar as they affect local fiscal or policy autonomy, also seem to matter in that they provide incentives for decentralized political action.

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technolog (191), innov (159), aid (92), state (74), govern (74), econom (68), decentr (67), structur (59), case (59), nation (56), polit (56), press (56), studi (52), research (52), first (50), blood (49), variabl (45), differ (45), industri (43), progress (43), polici (42),

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Keywords: technology, technological, innovation, institutions, structure, decentralization, comparative
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Name: American Political Science Association
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MLA Citation:

Taylor, Mark. "A Study of the Comparative Political Economy of Innovation: How Political Institutions Affect Long-Run Technological Progress" Paper presented at the annual meeting of the American Political Science Association, Boston Marriott Copley Place, Sheraton Boston & Hynes Convention Center, Boston, Massachusetts, Aug 28, 2002 <Not Available>. 2009-05-26 <http://www.allacademic.com/meta/p66520_index.html>

APA Citation:

Taylor, M. Z. , 2002-08-28 "A Study of the Comparative Political Economy of Innovation: How Political Institutions Affect Long-Run Technological Progress" Paper presented at the annual meeting of the American Political Science Association, Boston Marriott Copley Place, Sheraton Boston & Hynes Convention Center, Boston, Massachusetts Online <.PDF>. 2009-05-26 from http://www.allacademic.com/meta/p66520_index.html

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: Is there a causal relationship between government structure and long-run technological progress? This question is motivated by a series of empirical observations which have over time generated the perception that decentralized states, those with multiple and balanced centers of political power, are more technologically innovative than centralized states. However, this relationship has yet to be formally tested. The purpose of this paper is to take steps in this direction, first by reviewing relevant contributions from the theoretical literature, then by attempting a statistical test of the relationship between national innovation rates and government centralization, and finally by conducting a prima-facie case-study in order to generate further testable hypotheses. This paper will show, first that political-economic theory suggests various causal paths by which either decentralization or centralization might promote technological progress. The former is exemplified by race-to-the-bottom competitions for investment, the latter by reductions in transactions and coordination costs. Econometric analysis using a new dataset of international patent activity to measure innovation and either dummies or Lijphart?s index to measure decentralization suggests that if a structure-technology relationship exists then it is more complex than that characterized by current theories. A brief review of previous case studies, as well as a study of innovation and diffusion of two blood products technologies, are then conducted in order to better specify the theory. The case studies suggest that technological progress is not neutral, but rather creates winners and losers, and the losers act politically to defend themselves. Losers seek to capture government in a Stiglerian manner in order to influence policy and thereby to block or slow threatening technological change. This capture appears to be less difficult or costly when government is centralized into fewer capture ?points?, whereas decentralized government drives up these costs while offering innovators and diffusers the chance to "venue-shop" around political resistance. Electoral institutions, insofar as they affect local fiscal or policy autonomy, also seem to matter in that they provide incentives for decentralized political action.

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Document Type: .pdf
Page count: 54
Word count: 24024
Text sample:
Research Note A Study of the Comparative Political Economy of Innovation: How Political Institutions Affect Long­Run Technological Progress Mark Z. Taylor Department of Political Science Massachusetts Institute of Technology Cambridge MA 02139 contact: mzak@mit.edu Presented at The 98 th Annual Meeting of the American Political Science Association Boston MA August 2002 Abstract Is there a causal relationship between government structure and long­run technological progress? This question is motivated by a series of empirical observations which have over time generated
(2.91e­08) 2.92e­08 (2.06e­08) wgnppc60 0.005 (.0004) 0.005 (.0008) 0.004 (.0007) 0.0006 (0.0001) 0.001 (0.0003) 0.001 (0.0003) 0.005 (0.0005) 0.005 (0.0005) 0.004 (0.0004) watts60 11.7 (6.70) 0.01 ­1 (1.39) 0.8 ­18.0 (5.97) (6.20) lfed 5.79 (3.02) 0.42 (3.83) ­0.74 (0.97) fedage60 0.34 (0.16) 0.04 (0.06) 1.14 0.76 (0.09) (0.09) wbppc60 0.20 (0.005) 0.19 (0.011) 0.19 (0.01) km2 2.38e­06 (1.29e­06) popden60 .000 ­0 3 (0.008) _cons ­8.77 (2.94) ­27.8 (7.49) ­15.3 (9.25) ­1.37 (0.62) ­4.65 (2.59) ­3.61 (3.00) ­9.24 (2.98) ­8.08


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