The IPL newsletter: Volume 19, Issue 385


LG Signs Research Partnership with the University of Toronto, Sets Up AI Lab in Toronto

UofT News
LG Electronics believes the University of Toronto’s expertise in artificial intelligence will make life better for the company and its customers. The global maker of smartphones, TVs and home appliances has signed a five-year, multimillion-dollar research partnership with U of T that will see it collaborate with the university’s top AI researchers. With plans to incorporate AI technologies throughout its product lineup, South Korea-based LG also announced plans to establish an AI research lab in Toronto. The lab, the latest to be established by an international tech giant, will be located near U of T’s downtown Toronto campus.

Toronto Ranks Highest in Tech Jobs Growth in Canada

The Canadian Press
Toronto has added the most technology jobs in the past five years and has the fourth-best tech talent market in Canada and the U.S., according to a new report released Tuesday. The report by CBRE Group said Toronto added 82,100 technology-related jobs between 2012 and 2017 to beat out the San Francisco Bay Area for the spot by about 4,270 jobs. The overall ranking of 50 cities by the commercial real estate services firm is based on 13 metrics including tech job growth, education levels, office rents, population trends, and housing costs. Ottawa ranked 13th overall, followed by Montreal at 14th, while Vancouver came in at 25th.

New Book – Discovering American Regionalism: An Introduction to Regional Intergovernmental Organizations

David Y. Miller and Jen Nelles, with George Dougherty and Jay Rickabaugh, Routledge
Regions are difficult to govern – coordinating policies across local jurisdictional boundaries in the absence of a formal regional government gives rise to enormous challenges. Yet some degree of coordination is almost always essential for local governments to effectively fulfill their responsibilities to their citizens. State and local governments have, over time, awkwardly, and with much experimenting, developed common approaches to regional governance. In this revolutionary new book, authors David Miller and IPL newsletter editor Jen Nelles offer a new way to conceptualize those common approaches: Regional Intergovernmental Organizations (RIGOs) that bring together local governments to coordinate policies across jurisdictional boundaries. RIGOs are not governments themselves, but as Miller and Nelles demonstrate, they do have a measure of political authority that allows them to quietly and sometimes almost invisibly work to further regional interests and mitigate cross-boundary irritations. Providing a new conceptual framework for understanding how regional decision-making has emerged in the U.S., this book will provoke a new and rich era of discussion about American regionalism in theory and practice. Discovering American Regionalism will be a future classic in the study of intergovernmental relations, regionalism, and cross-boundary collaboration.

Editor's Pick

Order out of Chaos: The Case for a New Conceptualization of the Cross-Boundary Instruments of American Regionalism

David Miller and Jen Nelles, Urban Affairs Forum
American regions are made up of interdependent local governments. Their interdependencies stem from the fact that many problems, opportunities, and issues routinely ignore and transcend the clear jurisdictional boundaries between neighboring cities, counties, and towns. Figuring out how to work across those boundaries has proved both elusive and a challenging.  That said, state and local governments have, over time, awkwardly, and with much experimenting, developed mechanisms of regional governance. This blog post introduces the concept of Regional Intergovernmental Organizations (RIGOs) and provides some background data about what they look like and where they are operating in American regions.

Innovation Policy

When Does Environmental Regulation Stimulate Technological Innovation?

David M. Hart, ITIF
Environmental regulation usually requires businesses to take actions they would not take in response to market forces alone.  Compliance with regulation should reduce the damage to the air, land, water, and living creatures that would have been caused by market-motivated business activity. Although these benefits are often difficult to measure, they outweigh the costs when regulation is well designed. Technological innovation allows businesses to sell new products and services and to reduce costs by introducing new production processes. It is a very important cause of improvements in living standards in modern society. A majority of long-term economic growth is attributable to technological innovation. Some experts argue there is an inherent tension between environmental regulation and technological innovation. Environmental regulation deters risk taking that leads to innovation, according to their view. When complying with regulation, firms use well-established methods to minimize uncertainty, even when doing so is costly. Also, spending on regulatory compliance may crowd out alternative investments that might otherwise have led to valuable innovations. Other experts argue that environmental regulation and technological innovation are complementary. They hold that the need to comply with regulation stimulates businesses to explore neglected technological pathways—which leads to the development of new and improved products and processes. Environmental regulation, from this perspective, is a win for both the public and the regulated industry, because the resulting innovations reduce or even eliminate the cost of compliance even as they limit pollution. Neither of these polar positions is right all of the time. This report first defines the key terms of this long-running argument among experts and explains why it is important enough to occasionally take on a quasi-religious tone. It then summarizes each of the 12 conditions that influence whether environmental regulation will stimulate technological innovation. The report concludes by spelling out five rules of thumb to guide environmental policymakers.

Artificial Intelligence, Economics, and Industrial Organization

Hal Varian, NBER
Machine learning (ML) and artificial intelligence (AI) have been around for many years. However, in the last 5 years, remarkable progress has been made using multilayered neural networks in diverse areas such as image recognition, speech recognition, and machine translation. AI is a general purpose technology that is likely to impact many industries. In this chapter, Varian considers how machine learning availability might affect the industrial organization of both firms that provide AI services and industries that adopt AI technology. The intent is not to provide an extensive overview of this rapidly-evolving area, but instead to provide a short summary of some of the forces at work and to describe some possible areas for future research.

Productivity Insights Network Evidence Reviews

Productivity Insights Network
The Productivity Insights Network was established in January 2018 and is funded by the  Economic and Social Research Council. As a multi-disciplinary network of social science researchers engaged with public, private, and third sector partners, its aim is to change the tone of the productivity debate in theory and practice. The website features a series of initial analysis reports designed to highlight key challenges and themes of interest to the network. These include the following contributions, with more to come:

Cities, Clusters & Regions

Rethinking Cluster Initiatives

Ryan Donahue, Joseph Parilla, and Brad McDearman, Brookings
Industry clusters—groups of firms that gain a competitive advantage through local proximity and interdependence—offer a compelling framework for local and state leaders to analyze and support their economies. Both theory and academic research suggest that firms and regions benefit from clustering, evidence that has led to widespread adoption of clusters within the economic development field. But there are glaring gaps between the recognition that clusters play an important role in an economy that demands concentration and specialization and the practical ability to develop initiatives that help firms within clusters become more competitive and spur growth. The purpose of this paper is to help regional leaders focused on economic development confidently and knowledgeably embrace cluster initiatives where they make sense, and, where they do not make sense, recognize that there are potentially equally powerful alternatives. This paper draws on a literature review, interviews with cluster experts, and five in-depth case studies that reflect successful, if not exceptional, cluster initiatives.

Ohio BOLD: A Blueprint for Accelerating the Innovation Economy

TEConomy Partners
Understanding the importance of advancing innovation to help ensure economic prosperity, the State of Ohio has a long history of investing significant resources in innovation-based investments that have helped strengthen the state’s key economic industrial drivers. Beginning in the 1980s with investments in the Thomas Edison Program and continuing through today with investments in both the Ohio Third Frontier and JobsOhio, the state has been heralded by many as a pioneer in innovation-based economic development. However, there is great concern that the past decades’ economic success may have been part of a nonsustainable bubble, hiding the fact that Ohio’s economic competitive strength was being eroded by changing economic drivers, including outsourcing, declining real-dollar investment in domestic research and development (R&D), and the rise of a new breed of technology-savvy global competitors. In this fast-paced, global economic paradigm, innovation initiatives are no longer just an important endeavor, but an absolute necessity for the state’s economic competitiveness moving forward. In an interesting paradox, the more global and integrated the economy becomes, the more local R&D know-how, entrepreneurial culture, workforce skills, and manufacturing competencies matter for economic success. Even with Ohio’s proactive stance in cutting-edge innovation and economic development initiatives, global competition and continued technological advancements requires Ohio to embrace new paradigms to ensure its investments are impactful and far reaching.

Landing Amazon HQ2 isn’t the Right Way for a City to Create Jobs. Here’s What Works Instead

Amy Liu, Harvard Business Review
Amazon’s highly visible search for a second headquarters has offered one tremendous public benefit: it has raised public awareness of what bad economic development is. Even Saturday Night Live satirized the lengths to which local officials will go to woo a major company, which include offering massive amounts of taxpayer subsidies, despite dubious economic returns. But if attracting Amazon and other companies is not the right way to create jobs, then what is? This article offers some insights into how to effectively grow jobs in cities.

Statistics & Indicators

Chinese VC Market Surpasses US

Robert Ksiazkiewicz, SSTI Weekly Digest
For the first time, the Chinese venture capital (VC) market has surpassed the U.S. VC market in total dollars invested in Q2 of 2018, according to Crunchbase. Driven by mega rounds and strong corporate VC, Chinese startups were able to raise more VC money in Q2’18 than their American counterparts. The strong Q2 for Chinese’s firms was driven by a very strong April. Chinese companies attracted approximately $15.6 billion that month. In comparison, U.S. companies attracted an average of U.S. $9.4 billion per month in Q1’18. In total, Chinese firms attracted approximately 47 percent of all reported VC dollars invested in Q2’18. If this trend continues, 2018 may become the year of the Chinese VC market.

Policy Digest

Skillscape: How Skills Affect Your Job Trajectory, and their Implications for Automation by AI

Ahmad Alabdulkareem et al., MIT
How do workers move up the corporate ladder and how can they maximize their career mobility? Increased wealth disparity, increased job polarization, and decreases in absolute income mobility (i.e. the fraction of children who earn more than their parents) all suggest that upward mobility is difficult for today’s workers. It’s as if the rungs on the ladder to career success are there for some and absent for others. But who is stuck, and why?

By conventional wisdom, education determines a worker’s entry into the labor force. Workers who start higher up on the ladder have a better chance of reaching the top. However, returns on higher education have not kept pace with growing costs and mid-career workers are generally unwilling to return to school.

Instead, most workers utilize their existing knowledge, ability, and skills — along with social connections— to advance their careers. That is, a worker is more likely to fill a job opening if their capabilities meet the job’s requirements. These capabilities more aptly represent the rungs on the corporate ladder, which are present for some and absent for others.

This theory of skills is not new and skill matching has long been considered a key mechanism in the job matching process (just ask the winners of the 2010 Nobel Prize in Economics). Earlier studies of job polarization and limited career mobility have taken note and focused on different types of labor. For example, Daron Acemoglu and David Autor measure the annual wages of occupations and observe a “hollowing of the middle class,” which they describe as growing employment share for low- and high-skill employment at the expense of middle-skill employment. They argue that high-skill employment leverage cognitive skills, while low-skill employment rely more prominently on physical skills.

These cognitive and physical labor categories — in addition to traditional measures of education and wage — are very broad. For example, consider that Civil Engineers and Medical Doctors are both professions that fall into the same conventional labor categories; they both have high educational requirements, make high wages, and require cognitive non-routine labor. Yet, their skill sets are largely non-transferable. To explain why Civil Engineers are unlikely to become Medical Doctors — and to explain where skill sets might limit other workers’ career mobility — we need a higher resolution framework for specific workplace skills.

This study answers a call for a better resolution into workplace skills. Rather than focusing on broad expertly-derived skill categories, the Skillscape interface employs a completely data-driven approach using high-resolution occupational skill surveys carried out by the US Department of Labor. By examining how pairs of skills co-vary in importance across occupations and controlling for ubiquitous skills, the project identifies pairs of skills with high complementarity. Skill pairs exhibiting complementarity tend to support each other by boosting the productivity of workers who possess both skills, or by the ease of acquiring skills simultaneously. For example, Mathematics and Programming have high complementarity, but Programming and Explosive Strength do not.

How Do Workers Navigate With Skills?

The Skillscape adds resolution to traditional models by incorporating specific workplace tasks and skills. This improved resolution sheds new light on where bottlenecks limit career mobility due to skill mismatch. So, how can a worker leverage their existing skills to grow their skill set and open-up new career opportunities?

According to skill matching theory, workers should be able to obtain new jobs if their existing skill set is similar enough to the skill requirements of a job opportunity. This analysis demonstrates that skill complementarity, which define the links between skills in the Skillscape, accurately predicts the skills of a worker’s new job from the skill requirements of the worker’s previous job. However, this is not the only labor trend that can be explained with this framework! The Skillscape also predicts temporal changes to occupational skill requirements and even how the skills of entire urban labor markets evolve over time. This level of insight demonstrates how workplace skills underly the US economy and suggests that this framework has the potential to inform worker retraining programs and urban policy aimed at maintaining employment opportunities in an increasingly competitive economy due to globalization and automation.

The Consequences of Skills Polarization

While exciting, these results are also concerning. When the skill polarization of the Skillscape is combined with the researchers’ ability to predict workers’ transitions between jobs, it is possible to see precisely how skill matching might create a bottleneck to workers’ career mobility and create job polarization as a result. In fact, when this research identifies three types of workers: (1) cognitive workers, (2) physical workers, and (3) workers who are stuck straddling between the two sets of skills. Socio-cognitive workers have access to many other socio-cognitive job opportunities because their skills are nearby to other socio-cognitive skills. This is because the Skillscape’s socio-cognitive skills form a densely connected network community. Likewise, workers who rely on physical skills also enjoy lateral mobility among similarly physical employment opportunities. However, this lateral mobility is not upward mobility. Occupations with higher annual wages tend to rely more strongly on socio-cognitive skills (see above). This means that physical workers who are looking to climb-up the career ladder must bridge the gap in the Skillscape between the two skill sets. However, workers who attempt this transition actually get stuck according to national employment statistics! Effectively, we find that skill polarization acts as a bottleneck to career mobility.

Implications for AI and Automation

It has long been thought that off-shoring and technological change contribute to growing wealth disparity and job polarization in the US. Although occupations and employment are often the units of interest, these mechanisms actually operate on skills directly. Consider that a specific technology is often narrow in scope (e.g. robotic arm has finite degrees of motion or a particular machine learning algorithm is designed to solve a specific class of problems). This means that each piece of technology actually alters the demand for very specific skills (e.g. the robotic arm diminishes demand for workers with Manual Dexterity). These microscopic perturbations to skill demand accumulate and diffuse throughout the national labor system as macroscopic labor trends including technological unemployment, worker migration, and occupational skill redefinition. It is imperative to understand the role of individual workplace tasks and skills in the broader labor system if we are to improve our understanding of off-shoring and automation. This study is the first step in that direction.

A worker can climb the career ladder only if enough rungs are in place. Accordingly, this research demonstrates that a worker’s set of skills, knowledge, and abilities directly influences their opportunities for career mobility. And a focus on specific workplace skills could not have come at a better time! As rungs from the ladder are systematically removed by off-shoring and automation, we must continue to improve labor models that account for these microscopic perturbations to skills. The improvements offered in this study reveal the important role of skill polarization as an underlying mechanism for job polarization. This important fact will help policy makers as they design policy to maintain or grow current employment opportunities in an increasingly polarized economy.


Triple Helix XVI Manchester

Manchester, UK, 5-8 September, 2018
Across the world, states and city regions are facing huge societal, economic, environmental, and political challenges whose solutions require concerted new efforts and innovative partnerships. The 2018 International Triple Helix Conference brings together academia, government, business, and community to share effective practices and to advance the frontiers of knowledge about collaboration for economic progress, social development and sustainability, and the role of cities and regions as enabling spaces for these interactions.

Call for Participation: International PhD Course on Economic Geography

Utrecht, The Netherlands, 11-14 September and 30 October-2 November, 2018
The course aims to provide an introduction to contemporary research perspectives and approaches in economic geography. The core questions of this discipline – related to the role of place and space in processes of economic development – have in recent years attracted interest not just from geographers but also from economists and other social scientists. This course will debate recent theoretical developments (with special attention to evolutionary and institutional economic geography), and will discuss recent advancements in methodology and empirical analysis in economic geography.

2018 European Week of Regions and Cities – Masterclass on EU Cohesion Policy for PhD Students and Early Career Researchers

Brussels, Belgium, 7-11 October, 2018
As part of the 16th European Week of Regions and Cities (EWRC), the biggest event worldwide on regional and urban development, the Master Class on EU Cohesion Policy will be held for PhD students and early-career researchers for the sixth time. Applications are being sought from PhD students and early career researchers (defined as being within five years of the date on their PhD certificate or equivalent) undertaking research related to European Cohesion Policy to attend the 2018 University Master Class. The Master Class is a unique format to connect aspiring researchers and will include presentations of papers by the participants as well as lectures and panel debates with policymakers, EU officials and senior academics to improve understanding of, and research, on EU Cohesion Policy. In particular, the Master Class will serve to

  • discuss recent research on European regional and urban development and EU Cohesion Policy;
  • enable PhD students and early career researchers to exchange views and network with policymakers, EU officials and senior academics;
  • raise awareness and understanding of the research potential in the field of EU Cohesion Policy.

 The Master Class is organised and led by the European Commission, DG for Regional and Urban Policy (DG REGIO), the European Committee of the Regions (CoR) and the Regional Studies Association (RSA) in cooperation with the European Regional Science Association (ERSA) and the Association of European Schools of Planning (AESOP).

TCI 2018 – Unexpected Connections: Collaborating to Compete – Clusters in Action

Toronto, 16-18 October, 2018
Cluster success is often the result of collaboration, more than just the agglomeration of anchor firms, R&D labs, incubators and accelerators, and disrupting organizations. Regions with clusters that actively collaborate within and between one another are more competitive. As firms continue to face new challenges from technological, economic, and political shifts, clusters remain a driving catalyst that can create sustainable levels of innovation and economic growth. Firms, at the heart of active clusters, with the support of those within the cluster ecosystem, can weather the changing dynamics of the global marketplace. TCI 2018 explores the collaboration that is happening within clusters and the opportunities to work together towards shared prosperity.

Regional Studies Association – Networking Workshop for Early and Mid-Career Women in Regional Studies and Regional Science

Brighton, UK, 24 October, 2018
As they complete their doctoral studies, all Early Career Scholars face decisions including whether or not to stay in academia. This post PhD period can also include challenges and uncertainties around roles, locations, contracts and funding. Mid-Career Scholars face new challenges in their academic career when starting a faculty position, e.g. a lectureship or an assistant professorship. In this period each scholar must find strategies to balance the different responsibilities in teaching, administration and research. Academics in this transition often make unconscious decisions about their style of leadership or teaching. An important element in dealing with these uncertainties and in taking conscious decisions is access to a strong network, the chance to plan and discuss career opportunities and the opportunity to discuss these issues with role models, mentors and coaches. For this reason, the Regional Studies Association supports the development of a network specifically designed for female early and mid-career researchers in the fields of regional studies and regional science. The aim is to provide a platform for network building and to offer conversations with established female researchers in an informal setting. 

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This newsletter is prepared by Jen Nelles.
Project manager is David A. Wolfe